☒
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the quarterly period ended September
30, 2016

☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

Commission File Number: 001-32508

LUCAS
ENERGY, INC.

(Exact name of registrant as specified in
its charter)

Nevada

20-2660243

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer

Identification No.)

450 Gears Road, Suite 860, Houston,
Texas 77067

(Address of principal executive offices)
(Zip Code)

(713) 528-1881

(Registrant’s telephone number, including
area code)

Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant
has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted
and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter
period that the registrant was required to submit and post such files). Yes ☒ No ☐

Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions
of “large accelerated filer”, “accelerated filer”, “non-accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act (Check one):

Large accelerated filer
☐

Accelerated filer ☐

Non-accelerated filer
☐

Smaller reporting company
☒

Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding
of each of the issuer’s classes of common stock, as of the latest practicable date.

The accompanying notes are an integral part
of these consolidated financial statements.

3

LUCAS ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

Three Months Ended

Six Months Ended

September 30,

September 30,

2016

2015

2016

2015

Operating Revenues

Crude Oil

$

501,891

$

289,974

$

655,135

$

683,701

Natural Gas

168,998

—

168,998

—

NGL

223,624

—

223,624

—

Total Revenues

894,513

289,974

1,047,757

683,701

Operating Expenses

Lease Operating Expenses

500,327

252,759

776,524

415,483

Severance and Property Taxes

51,706

32,872

75,568

70,495

Depreciation, Depletion, Amortization, and
Accretion

522,779

259,950

659,682

535,038

Impairment of Oil and Gas Properties

48,990,520

—

48,990,520

—

General and Administrative

1,041,652

628,998

1,699,422

1,178,819

Total Expenses

51,106,984

1,174,579

52,201,716

2,199,835

Operating Loss

(50,212,471

)

(884,605

)

(51,153,959

)

(1,516,134

)

Other Expense (Income)

Interest Expense

587,398

120,764

926,889

506,219

Other Expense (Income), Net

5,408

(52,678

)

95,781

(37,789

)

Total Other Expenses

592,806

68,086

1,021,670

468,430

Net Loss

$

(50,805,277

)

$

(952,691

)

$

(52,175,629

)

$

(1,984,564

)

Net Loss Per Common Share

Basic and Diluted

$

(7.74

)

$

(0.66

)

$

(12.61

)

$

(1.39

)

Weighted Average Number of Common Shares Outstanding

Basic and Diluted

6,565,784

1,449,825

4,136,776

1,427,317

The accompanying notes are an integral part
of these consolidated financial statements.

4

LUCAS ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Unaudited

Six Months Ended

September 30,

2016

2015

Cash Flows from Operating Activities

Net Loss

$

(52,175,629

)

$

(1,984,564

)

Adjustments to reconcile net losses to net cash used in operating activities:

Depreciation, Depletion, Amortization and Accretion

659,682

535,038

Impairment of Oil and Gas Properties

48,990,520

—

Share-Based Compensation

84,544

97,402

Amortization of Deferred Financing Costs

—

125,145

Amortization of Discount on Notes

593,536

21,323

Change in Fair Value of Derivative Liability

33,080

—

Gain on Settlement of Accounts Payable

(18,953

)

(14,613

)

Loss (Gain) on Sale of Property and Equipment

—

602

Changes in Components of Working Capital and Other Assets

Accounts Receivable

(986,487

)

35,152

Inventories

—

(478

)

Prepaid Expenses and Other Current Assets

(13,887

)

65,960

Accounts Payable and Accrued Expenses

183,083

401,218

Net Cash Used in Operating Activities

(2,650,511

)

(717,815

)

Investing Cash Flows

Cash Paid for Segundo Acquisition

(4,975,000

)

—

Cash Paid for Oil and Gas Property Development Costs

(969,532

)

(134,510

)

Proceeds from Victory Settlement

—

54,021

Additions of Other Property and Equipment

(9,696

)

—

Deposit for Acquisition of Property and
Equipment

—

1,628

Cash Paid for Deposits

(62,653

)

—

Net Cash Used in Investing Activities

(6,016,881

)

268,739

Financing Cash Flows

Proceeds from Issuance of Notes Payable

1,610,000

450,000

Principal Repayment on Notes Payable

(385,000

)

—

Proceeds from Issuance of Long-Term Notes Payable

41,530,000

—

Principal Repayment of Long-Term Notes Payable

(30,869,812

)

—

Proceeds from Issuance of Convertible Notes

150,000

—

Bond Sinking Fund Deposit

(3,124,444

)

—

Proceeds from Issuance of Series C Preferred Stock and Warrants

500,000

—

Sale of Treasury Stock

—

104,754

Stock Placement Fees Paid

(79,857

)

(22,013

)

Net Cash Provided by Financing Activities

9,330,887

532,741

Increase in Cash

663,495

83,665

Cash at Beginning of the Period

197,662

166,597

Cash at End of the Period

$

861,157

$

250,262

The
accompanying notes are an integral part of these consolidated financial statements.

5

LUCAS ENERGY, INC.

NOTES TO FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - GENERAL

History of the
Company. Incorporated in Nevada in December 2003 under the name Panorama Investments Corp., the Company changed its name
to Lucas Energy, Inc. effective June 9, 2006.

The accompanying unaudited
interim consolidated financial statements of Lucas Energy, Inc. (“Lucas” or the “Company”) have been prepared
in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission,
and should be read in conjunction with the audited financial statements and notes thereto contained in Lucas’s annual report
filed with the SEC on Form 10-K for the year ended March 31, 2016. In the opinion of management, all adjustments, consisting of
normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations for the interim
periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the
results to be expected for the full year. Notes to the consolidated financial statements which would substantially duplicate the
disclosures contained in the audited financial statements for the most recent fiscal year 2016 as reported in the Form 10-K have
been omitted.

Our fiscal year ends
on the last day of March of each year. We refer to the twelve-month periods ended March 31, 2017 and 2016 as our 2017 and 2016
fiscal years, respectively.

On July 15, 2015,
the Company effected a 1-for-25 reverse stock split of all of the outstanding shares of the Company’s common stock. Proportional
adjustments were also made to the conversion and exercise prices of the Company’s outstanding convertible preferred stock,
warrants and stock options, and to the number of shares issued and issuable under the Company’s stock incentive plans. All
issued and outstanding shares of common stock, conversion terms of preferred stock, options and warrants to purchase common stock
and per share amounts contained in the financial statements have been retroactively adjusted to reflect the reverse split for all
periods presented.

NOTE 2 – LIQUIDITY AND GOING
CONCERN CONSIDERATIONS

At September 30,
2016, the Company’s total current liabilities of $15.9 million exceeded its total current assets of $6.0 million,
resulting in a working capital deficit of $9.9 million, while at March 31, 2016, the Company’s total current
liabilities of $11.1 million exceeded its total current assets of $0.6 million, resulting in a working capital deficit of
$10.5 million. The $0.6 million decrease in the working capital deficit is primarily related to $5.4 million in cash and
restricted cash received, together with additional receivables, each relating to the closing of the transactions contemplated
by the Asset Purchase Agreement described below, offset by $4.8 million in additional borrowings and payables.

On December 30, 2015,
we entered into an Asset Purchase Agreement, as amended from time to time (the “Asset Purchase Agreement”), to acquire,
from twenty-three different entities and individuals (the “Sellers”), working interests in producing properties and
undeveloped acreage, which acquisition transaction was completed on August 25, 2016. The assets acquired include varied interests
in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region. In connection with the closing of the acquisition,
we assumed approximately $30.6 million of commercial bank debt, issued 13,009,664 shares of common stock to certain of the Sellers,
issued 552,000 shares of Series B Preferred Stock to one of the Sellers, and paid $4,975,000 in cash to certain of the Sellers.
The effective date of the acquisition (the “Acquisition”) was April 1, 2016.

Pursuant to a Letter
Agreement we entered into, at the closing of the Acquisition, with RAD2 Minerals, Ltd. (“RAD2”), one of the Sellers,
which is owned and controlled by Richard N. Azar II, who was appointed as our Chairman on August 26, 2016, RAD2 agreed to accept
full liability for any and all deficiencies between the “Agreed Assets Value” set forth in the Asset Purchase Agreement
of $80,697,710, and the mutually agreed upon value of the assets delivered by the Sellers at the closing of the Acquisition, up
to an aggregate of $1,030,941 (as applicable, the “Deficiency”).

6

As discussed in Note
6, we borrowed $40 million from International Bank of Commerce. The proceeds of the loan were used to repay and refinance approximately
$30.6 million of indebtedness owed by certain of the Sellers, to the Lender.

On April 6, 2016, we
entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an accredited institutional
investor (the “Investor”), pursuant to which we sold and issued a redeemable convertible subordinated debenture, with
a face amount of $530,000, initially convertible into 163,077 shares of common stock at a conversion price equal to $3.25 per share
and a warrant to initially purchase 1,384,616 shares of common stock (subject to adjustment thereunder) at an exercise price equal
to $3.25 per share (the “First Warrant”). The Investor purchased the debenture at a 5.0% original issue discount for
the sum of $500,000 and has exercised the First Warrant for the sum of $4.5 million.

Also on April 6, 2016,
we entered into a Stock Purchase Agreement with the Investor, pursuant to which we agreed, subject to certain conditions, to issue
527 shares of Series C redeemable convertible preferred stock (the “Series C Preferred Stock”) at a 5% original issue
discount, convertible into 1,618,462 shares of common stock at a conversion price of $3.25 per share, and a warrant to purchase
1,111,112 shares of common stock at an exercise price of $4.50 per share (the “Second Warrant”). Under the terms of
the Stock Purchase Agreement, the Second Warrant and 53 shares of Series C Preferred Stock were sold and issued for $500,000 on
September 2, 2016, and the remaining 474 shares of Series C Preferred Stock will be sold and issued for $4.5 million, subject to
the approval of the Investor and the Company, immediately after there was an effective registration statement covering the shares
of common stock issuable upon conversion of the Series C Preferred Stock, which effectiveness date occurred on, and which sale
took place on, October 31, 2016.

In July and August
2016, RAD2 advanced the Company an aggregate of $350,000. Also, in August 2016, two other Sellers advanced the Company an aggregate
of $200,000 ($100,000 each). These advances did not accrue interest and had no stated maturity date. Additionally, in August 2016,
RAD2 loaned us $1.5 million pursuant to a promissory note. The promissory note did not accrue interest for the first month it was
outstanding and accrued interest at the rate of 5% per annum thereafter until paid in full. As of the date of this report, the
Company has repaid the promissory note in full and all amounts advanced by RAD2 and the two other Sellers.

On October 7, 2016,
the Investor exercised the First Warrant in full and was due 1,384,616 shares of common stock upon exercise thereof and an additional
2,252,735 shares of common stock in consideration for the conversion premium due thereon. A total of 810,000 shares were issued
to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in
the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company
received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services
rendered in connection with the First Warrant. On October 19, 2016, the Investor notified the Company of an adjustment to the calculation
of the conversion premium triggered by a reduction in the trading price of the Company’s common stock, which resulted in
an additional 1,630,751 shares of common stock (5,558,102 shares in aggregate, including shares previously issued) being due in
connection with such exercise and the payment of the conversion premium. Also on October 19, 2016, we issued the Investor an additional
870,000 shares of common stock in connection with the October 7, 2016 exercise of the First Warrant. On October 27, 2016, the Investor
notified the Company of another adjustment to the calculation of the conversion premium triggered by a further reduction in the
trading price of the Company’s common stock, which resulted in an additional 826,981 shares of common stock (6,385,083 shares
in aggregate, including shares previously issued) being due in connection with such exercise and the payment of the conversion
premium. Also on October 27, 2016, we issued the Investor an additional 920,000 shares of common stock in connection with the October
7, 2016 exercise of the First Warrant. Since October 27, 2016, the trading price of our common stock has further declined, triggering
a further reduction in the conversion price of the conversion premium and an increase in the number of shares due the Investor
in connection with the conversion of the amount owed in connection with the conversion premium.

In addition to the
transactions noted above, Lucas is currently discussing potential financing transactions in order to fulfill our current capital
requirements, which we believe, if finalized and completed, will ensure the future viability of the Company, provided however,
that we are prohibited from raising capital, subject to certain limited exceptions until sixty days after the Company’s registration
statement to register the shares of common stock underlying the Second Warrant and 53 shares of Series C redeemable convertible
preferred stock has been declared effective. Additionally, due to our current capital structure and the nature of oil and gas interests,
i.e., that rates of production generally decline over time as oil and gas reserves are depleted, if we are unable to obtain the
necessary financing to drill additional wells and develop our proved undeveloped reserves (“PUDs”); coupled with the
continued substantial drop in commodity prices over the last twelve months, we believe that our revenues will continue to decline
over time. Therefore, we may be forced to scale back our business plan, sell assets to satisfy outstanding debts or take other
remedial steps which may include seeking bankruptcy protection.

7

If the Company is required
to seek financing, we may be prohibited from undertaking certain types of funding transactions by our prior funding agreements,
such financings may not be available or, if available, may not be on terms acceptable to the Company. Accordingly, the financial
statements do not include any adjustments related to the recoverability of assets or classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern
is dependent upon its ability to raise capital to meet its obligations and develop its oil and gas properties to attain profitable
operations.

These conditions raise
substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern
basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly,
the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.

NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES

The Company has provided
a discussion of significant accounting policies, estimates and judgments in its 2016 Annual Report. There have been no changes
to the Company’s significant accounting policies since March 31, 2016.

NOTE 4 – PROPERTY AND EQUIPMENT

Oil and Gas Properties

Lucas uses the full
cost method of accounting for oil and gas producing activities. Costs to acquire mineral interests in oil and gas properties, to
drill and equip exploratory wells used to find proved reserves, and to drill and equip development wells including directly related
overhead costs and related asset retirement costs are capitalized. Properties not subject to amortization consist of acquisition,
exploration and development costs, which are evaluated on a property-by-property basis. Amortization of these unproved property
costs begins when the properties become proved or their values become impaired and the corresponding costs are added to the capitalized
costs subject to amortization. Costs of oil and gas properties are amortized using the units of production method. Amortization
expense calculated per equivalent physical unit of production amounted to $14.62 per barrel of oil equivalent (“BOE”)
for the three months ended September 30, 2016, and was $31.81 per BOE for the three months ended September 30, 2015. Amortization
expense calculated per equivalent physical unit of production amounted to $15.75 per BOE for the six months ended September 30,
2016, and was $31.88 per BOE for the six months ended September 30, 2015.

In applying the
full cost method, Lucas performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of
property and equipment is compared to the “estimated present value,” of its proved reserves discounted at a
10-percent interest rate of future net revenues, based on current economic and operating conditions at the end of the period,
plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included
in costs being amortized, less the income tax effects related to book and tax basis differences of the properties. The price
used in the ceiling test is the simple average first of the month price for the prior 12 months. If capitalized costs exceed
this limit, the excess is charged as an impairment expense. As of September 30, 2016, no impairment of oil and gas properties
was indicated, aside from the impairment recognized in conjunction with the Acquisition.

8

All of Lucas’s oil and gas properties
are located in the United States. Below are the components of Lucas’s oil and gas properties recorded at:

September 30,

March 31,

2016

2016

Proved leasehold costs

$

37,219,715

$

10,266,551

Costs of wells and development

61,489,895

37,534,624

Capitalized asset retirement costs

1,473,200

717,337

Total oil and gas properties

100,182,810

48,518,512

Accumulated depreciation and depletion

(35,013,143

)

(34,416,407

)

Net capitalized costs

$

65,169,667

$

14,102,105

In August 2016, our
wholly-owned subsidiary, CATI Operating, LLC (“CATI”), entered into an agreement to participate in the drilling and
completion of certain Eagle Ford wells under a joint operating agreement with Lonestar Resources US, Inc. (“Lonestar”)
to conduct improvement maintenance operations on the existing assets of CATI. The agreement with Lonestar covers over 1,450 gross
acres and Lucas’s participation will vary from an 8% to a 14% working interest in the units. The Company capitalized approximately
$800,000 in development costs associated with the Cyclone #9H and #10H wells during the current period.

On August 25, 2016,
the Company completed the Acquisition and acquired working interests in producing properties and undeveloped acreage from the Sellers
(see Note 2). The assets acquired include varied interests in two largely contiguous acreage blocks in the liquids-rich Mid-Continent
region.

As consideration for
the Acquisition of the acquired assets, the Company assumed approximately $30.6 million of commercial bank debt, issued 13,009,664
shares of common stock to certain of the Sellers, issued 552,000 shares of Series B Preferred Stock to one of the Sellers and its
affiliate (see Note 8), and paid $4,975,000 in cash to certain of the Sellers. The effective date of the Acquisition was April
1, 2016.

The following tables
summarize the purchase price and allocation of the purchase price to the net assets acquired in connection with the Acquisition:

Purchase Price on August 25, 2016:

Consideration Given

Fair value of common stock issued

$

49,176,530

Fair value of Series B Preferred Stock issued

14,898,038

Assumption of debt

30,595,256

Cash at Closing

4,975,000

Total purchase price

$

99,644,824

Net Assets Acquired

Accounts receivable

$

635,482

Total current assets acquired

635,482

Oil and gas properties

50,774,684

Total assets acquired

51,410,166

Asset retirement obligations

(755,862

)

Total liabilities acquired

(755,862

)

Net assets acquired

50,654,304

Impairment of oil and gas properties

48,990,520

Total Purchase Price

$

99,644,824

Use of Proceeds

Assumption of debt

$

30,595,256

Cash funding (due at closing)

4,975,000

Loan Commitment fee (due at closing)

200,000

Lien Payoff (due at closing)

72,657

Restricted cash (received at closing)

3,360,000

Cash (received at closing)

797,087

Debt payable after closing

$

40,000,000

9

NOTE 5 – ASSET RETIREMENT OBLIGATIONS

The following table
presents the reconciliation of the beginning and ending aggregate carrying amounts of long-term legal obligations associated with
the retirement of oil and gas property and equipment for the six-month period ended September 30, 2016. Lucas does not have any
short-term asset retirement obligations as of September 30, 2016.

Carrying amount at beginning of period - March 31, 2016

$

1,179,170

Acquisition of oil and gas
properties

755,862

Accretion

35,645

Carrying amount at end of period - September 30, 2016

$

1,970,677

NOTE 6 – NOTES PAYABLE AND DEBENTURE

The Company’s notes payable and debenture
consisted of the following:

September 30,

March 31,

2016

2016

Note Payable - Rogers

$

7,114,734

$

7,153,734

Promissory Note - Rogers

1,000,000

—

Note Payable - Dreeben

—

275,000

Convertible Notes Payable - Silver Star

—

800,000

Note Payable - RAD2

1,500,000

—

Convertible Notes Payable - HFT

600,000

450,000

Debenture

530,000

—

Note Payable - IBC

39,764,444

—

50,509,178

8,678,734

Unamortized
debt discount

(3,516,547

)

(583,183

)

Total Notes Payable and Debenture (1)

$

46,992,631

$

8,095,551

(1)

Includes $3.0 million of current portion of long-term debt at September 30, 2016.

Rogers Loan and Promissory Note

Letter Loan Agreement

At September 30, 2016,
the Company had $7,114,734 due under the $7.5 million Letter Loan Agreement (as amended, modified, restated and revised to date,
the “Rogers Loan”) originally entered into with Louise H. Rogers (“Rogers”) on August 13, 2013. Amortization
of debt discount of $21,323 was recorded during the year ended March 31, 2016 while no unamortized discount remained as of September
30, 2016.

10

Currently, the
Rogers Loan has a maturity date of January 31, 2017, and we have agreed to pay all professional fees incurred by Rogers and
to pay Rogers $39,000 in lieu of interest on the Rogers Loan as well as all operating income of collateralized assets
(beginning October 1, 2015). Also, we agreed to make principal payments to Rogers from certain insurance proceeds to be
received, which we have not received to date. For the months of January, February, March, June and July 2016, the Company did
not make the required monthly principal payments due pursuant to the terms of the Rogers loan as amended. Instead, the
Company and the loan administrator agreed to settle any outstanding administration and legal fees in lieu of the principal
payments. The Company paid approximately $98,000 related to the fees and effective July 5, 2016, the Company obtained a
waiver for the nonpayment of the principal amounts through July 2016. The Company has also not made the required monthly
principal payments due pursuant to the terms of the Rogers loan as amended for the months of August and September 2016,
and we plan to request a waiver for the months of August through November 2016.

Additionally, per a
prior amendment, we transferred all of our oil and gas interests and equipment to our then newly formed wholly-owned Texas subsidiary,
CATI Operating LLC, which clarified that following the transfer, Rogers had no right to foreclose upon the Company (at the Nevada
corporate parent level) upon the occurrence of an event of default under the Rogers Loan, and that instead Rogers would only take
action against CATI and its assets and required Rogers to release all UCC and other security filings on the Company (provided that
Rogers is allowed to file the same filings on CATI and its assets). Subsequently, we formally assigned all of our oil and gas interests
and equipment to CATI pursuant to an Assignment and Bill of Sale dated December 16, 2015.

On October 31, 2016,
we entered into an amendment dated October 31, 2016, to the Second Amended Letter Loan Agreement and the Second Amended Promissory
Note, both dated November 13, 2014, with Louise H. Rogers, our senior lender. Pursuant to the amendment, the parties agreed to
amend the (a) November 13, 2014 Second Amended Letter Loan Agreement and (b) November 13, 2014 Second Amended Promissory Note,
by extending the maturity date thereunder from October 31, 2016 to January 31, 2017. We also agreed to pay $9,000 to Ms. Rogers
and $9,000 to Robertson Global Credit, LLC, the servicer of the Amended Note, in connection with our entry into the amendment.

Promissory Note

On August 25, 2016,
and effective on August 15, 2016, our wholly-owned subsidiary, CATI borrowed $1 million from the Company’s senior lender,
Rogers. The amount borrowed accrues interest at the rate of 12% per annum (18% upon the occurrence of an event of default) and
is due and payable on or before November 9, 2016.

Pursuant to the terms
of the note, a total of 80% of all cash flow generated by CATI is required to first be paid to satisfy amounts owed under the August
2016 Note, and then to amounts owed under the Letter Loan, with the remaining 20% of such cash flow used by CATI for lease and
other operating expenses and capital expenditures approved by Rogers’ designated representatives. In connection with our
entry into the August 2016 note, we agreed to pay a loan origination fee of $50,000 and to pay all fees of Rogers’ counsel
in connection with the preparation and negotiation of the note. The $50,000 loan origination fee has been recorded as a discount
and is being amortized through interest expense using the effective interest method over the term of the note.

As additional consideration
in connection with the loan, CATI issued Robertson Global Credit, LLC, the administrator of the Rogers Loan, a 2% overriding royalty
interest in the wellbores of the Cyclone #9H and Cyclone #10H wells, pursuant to an Assignment of Overriding Royalty.

We used the funds raised
in connection with the August 2016 note for drilling and completion of certain Eagle Ford wells under a joint operating agreement
with Lonestar Resources, Inc. and maintenance capital expenditures on the existing assets of CATI.

As of September 30,
2016, the August 2016 note had a balance of $966,667 (net of the unamortized discount of $33,333) which is recognized as a short-term
liability on the Company’s balance sheet as of September 30, 2016. The Company has also recognized $12,000 in accrued interest
as of September 30, 2016. The August 2016 note was paid in full on October 11, 2016.

Silver Star Line of Credit

On August 30, 2015,
we entered into a Non-Revolving Line of Credit Agreement with Silver Star Oil Company (“Silver Star”). The line of
credit provided us the right to issue up to $2.4 million in convertible promissory notes to Silver Star. To date, Lucas has drawn
$1,000,000 under the line of credit for the months of October, November, December 2015 and January and February 2016. The convertible
notes contained a beneficial conversion feature with a combined intrinsic value of $687,987 for the five notes, which is recognized
as a discount and is being amortized through interest expense using the effective interest method over the term of the notes.

11

As of September 30,
2016, $800,000 of convertible notes had been assigned by Silver Star to Rockwell Capital Partners (“Rockwell”), of
which Rockwell has fully converted a total of $830,562 of the principal and interest due on such convertible notes outstanding
into shares of our common stock at a conversion price of $1.50 per share, for an aggregate of 553,708 shares.

On July 15, 2016, pursuant
to an assignment of convertible promissory note agreement, the Company was advised that the last $200,000 convertible promissory
note sold to Silver Star on February 20, 2016 was assigned by Silver Star to Texas Capital & Assets LLC. On September 28, 2016,
Texas Capital & Assets LLC converted $207,566 of principal and interest due on such convertible note into shares of our common
stock at a conversion price of $1.50 per share, for an aggregate of 138,377 shares.

As of September 30,
2016, the Company had no remaining Silver Star convertible notes outstanding and does not recognize any corresponding liability
on the Company’s balance sheet as all outstanding notes had been converted into shares of the Company’s common stock.

On March 29, 2016,
Lucas entered into a Convertible Promissory Note Purchase Agreement with HFT Enterprises, LLC (“HFT”). Pursuant to
the Note Purchase Agreement, we agreed to issue an aggregate of $600,000 in convertible notes, including $450,000 in convertible
notes purchased on the date of the parties’ entry into the agreement, and $150,000 in convertible notes purchased by Debra
Herman, the wife of Michael Herman, the principal of HFT, on April 26, 2016. We also granted Mrs. Herman warrants to purchase 124,285
shares of common stock with an exercise price of $1.50 per share on April 26, 2016, when the final loan was made pursuant to the
terms of the agreement.

Each of the convertible
notes are due and payable twelve months from their issuance date, accrue interest at the rate of 6% per annum (15% upon the occurrence
of an event of default), and allow the holder thereof the right to convert the principal and interest due thereunder into common
stock of the Company at a conversion price of $1.50 per share, provided that the total number of shares of common stock issuable
upon conversion of the convertible notes could not exceed 19.9% of our outstanding shares of common stock on March 29, 2016, until
shareholder approval for such issuances was received, which approval was received on August 23, 2016. The convertible notes contained
a beneficial conversion feature with a combined intrinsic value of $600,000 for the three notes, which is recognized as a discount
and is being amortized through interest expense using the effective interest method over the term of the notes.

As of September 30,
2016, we had total convertible notes due to HFT of $318,416 (net of the unamortized discount of $281,584) which is recognized as
a short-term liability on the Company’s balance sheet as of September 30, 2016. The Company has also recognized approximately
$18,000 in accrued interest as of September 30, 2016.

Dreeben Note

On
March 28, 2016, we borrowed $250,000 from Alan Dreeben, who is one of the sellers of the assets we acquired pursuant to the Asset
Purchase Agreement and since August 26, 2016, has been one of our directors, pursuant to a short-term promissory note. The short-term
promissory note has a principal balance of $275,000 (the $250,000 borrowed plus a $25,000 original issue discount). As additional
consideration for Mr. Dreeben agreeing to make the loan, we agreed to issue Mr. Dreeben 15,000 restricted shares of common stock
which were issued in September 2016. The Company recognized a $48,000 discount to the short-term promissory note which was based
on the closing price of the Company’s common stock ($3.20 per share) on March 28, 2016 in addition to the original discount
of $25,000, for a total discount of $73,000.

12

On June 27, 2016, we
entered into an amended and restated short-term promissory note, amending and restating the note originally entered into with Mr.
Dreeben on March 28, 2016; evidencing an additional $100,000 borrowed on June 13, 2016, plus a $10,000
original issue discount on such loan amount and extending the maturity date of the note to August 31, 2016.

On August 31, 2016,
the Company paid Mr. Dreeben the full amount due on the short-term promissory note of $385,000.

Debenture

On April 6, 2016, we
entered into a Securities Purchase Agreement with the Investor, pursuant to which we issued a redeemable convertible subordinated
debenture, with a face amount of $530,000, initially convertible into 163,077 shares of common stock at a conversion price equal
to $3.25 per share and a warrant to initially purchase 1,384,616 shares of common stock (subject to adjustment thereunder) at an
exercise price equal to $3.25 per share (the “First Warrant”). The Investor purchased the debenture at a $30,000 original
issue discount for the sum of $500,000 and agreed that it will exercise the First Warrant, upon satisfaction of certain conditions,
for the sum of $4.5 million. The debenture matures in seven years and accrues interest at a rate of 6.0% per annum. Due to the
recent decline in the price of our common stock and that a trigger event occurred on June 30, 2016 as a result of the delay in
filing our Annual Report on Form 10-K for the year ended March 31, 2016, the premium rate on the debenture increased from 6% to
17% and the conversion discount became 85% of the lowest daily volume weighted average price during the measuring period (60 days
prior to and 60 days after the last date that the Investor receives shares), less $0.10 per share of common stock not to exceed
85% of the lowest sales price on the last day of such period less $0.10 per share.

As the fair value of
the warrants issued in connection with the debenture exceeds the $530,000 value of the debenture, we fully discounted the entire
debenture and will amortize the discount over the term of the debenture. The discount is being amortized through interest expense
using the effective interest method over the term of the debenture.

As of September 30,
2016, we had a convertible subordinated debenture of $37,857 (net of the unamortized discount of $492,143) which is recognized
as a long-term liability on the Company’s balance sheet as of September 30, 2016. The Company has also recognized $34,000
in accrued interest as of September 30, 2016.

Loan Agreement with RAD2

Effective on August
25, 2016, RAD2, which was one of the Sellers and which is owned and controlled by Richard N. Azar II, who was appointed as our
Chairman on August 26, 2016, loaned us $1.5 million pursuant to a promissory note. The promissory note does not accrue interest
for the first month it is outstanding and accrues interest at the rate of 5% per annum thereafter until paid in full.

As of September 30,
2016, we had a promissory note due RAD2 of $1.5 million, which is recognized as a short-term liability on the Company’s balance
sheet as of September 30, 2016. The Company recognized no accrued interest as of September 30, 2016.

Loan Agreement with International
Bank of Commerce (“IBC”)

Effective August 25,
2016, we, as borrower, and Richard N. Azar II, who was appointed as our Chairman on August 26, 2016 and who also received the largest
number of securities and cash in connection with the closing of the Acquisition (“Azar”), Donnie B. Seay, Richard E.
Menchaca, RAD2, DBS Investments, Ltd. (“DBS”, controlled by Mr. Seay) and Saxum Energy, LLC (“Saxum”, which
is controlled by Mr. Menchaca), as guarantors (collectively, the “Guarantors”, all of which were directly or indirectly
Sellers), and International Bank of Commerce, as Lender (“Lender”), entered into a Loan Agreement.

Pursuant to the Loan
Agreement, the Lender loaned us $40 million, evidenced by a Real Estate Lien Note in the amount of $40 million. We are required
to make monthly payments under the note equal to the greater of (i) $425,000; and (ii) fifty percent (50%) of our monthly net income.
The note accrues annual interest at 2% above the prime rate then in effect, subject to a minimum interest rate of 5.5% per annum.
The note is due and payable on August 25, 2019. Payments under the Note are subject to change as the interest rate changes in order
to sufficiently amortize the note in 120 monthly installments. We have the right, from time to time and without penalty to prepay
the note in whole or in part, subject to the terms thereof.

13

The proceeds of the
loan were used to repay and refinance approximately $30.6 million of indebtedness owed by certain of the Sellers, to the Lender
(including an aggregate of $18.3 million owed by RAD2 and another entity controlled by Mr. Azar, $9.8 million owed by DBS, and
$2.1 million owed by Mr. Menchaca), as well as to pay the $4.975 million due to the Sellers at closing. Another $3.36 million was
used to fund a sinking fund required by the Lender, as discussed below, to pay principal on the Note.

The amount owed under
the note is secured by a Security Interest in substantially all of our assets and properties, pursuant to three Security Agreements.
Also, each of the Guarantors guaranteed the repayment of a portion of the Loan Agreement pursuant to a Limited Guaranty Agreement.
Additionally, in connection with the parties’ entry into the Loan Agreement and to further secure amounts due thereunder,
certain of the Guarantors pledged shares of common stock which they received at the closing to the Lender, with RAD2 pledging 3,120,606
shares of common stock; DBS pledging 935,934 shares of common stock; and Saxum pledging 673,392 shares of common stock.

The Loan Agreement
also provides that with respect to the properties located in Glasscock County, Texas, which we obtained ownership of at the closing
of the Acquisition (collectively, the “West Texas Properties”), we have the right to sell the West Texas Properties
after (i) the Lender approves the purchase and sale agreement in its sole discretion, (ii) the Lender receives as a prepayment
of the Loan, 50% of the sales proceeds of the West Texas Properties, but in no event less than $2,000,000, and (iii) the balance
of the sales proceeds of the West Texas Properties are deposited in the bank account that we are required to maintain with the
Lender, to be used to pay certain principal payments of the note as approved by Lender in its sole discretion.

We agreed to pay the
Lender a loan finance charge of $400,000 in connection with our entry into the Loan Agreement, with half due on the date we entered
into the Loan Agreement and half due on or before the 180th day following the date of the Loan Agreement. As further consideration
for agreeing to the terms of the Loan, we agreed to issue the Lender 390,290 shares of common stock. We recognized a $2.8 million
note discount related to these transactions and other debt issuance costs and will amortize the discount and debt issuance costs
over the term of the note.

As of September 30,
2016, we had a loan due to IBC of $39.8 million, of which $3.0 million is recognized as short-term liability and $34.1 million
(less debt issuance costs of approximately $2.7 million) is recognized as a long-term liability on the Company’s balance
sheet as of September 30, 2016. The Company has also recognized approximately $30,000 in accrued interest as of September 30, 2016.

NOTE 7 – ADVANCE PAYABLES

In July and August
2016, RAD2 advanced the Company an aggregate of $350,000. This advance does not accrue interest and has no stated maturity date.
Also, in August 2016, two other Sellers advanced the Company an aggregate of $200,000 ($100,000 each). These advances do not accrue
interest and had no stated maturity date.

The Company paid
$335,000 due on the advances on August 26, 2016 and recognized the remaining $215,000 due to RAD2 as a short-term
liability on the balance sheet as of September 30, 2016.

NOTE 8 – STOCKHOLDERS’ EQUITY

Series A Convertible Preferred Stock

On April 19, 2016,
the holder of our Series A Convertible Preferred Stock, agreed to convert all 500 shares of our outstanding Series A Convertible
Preferred Stock into 20,000 shares of our common stock (a conversion ratio of 40:1 as provided in the original designation of the
Series A Convertible Preferred Stock adjusted for the Company’s 1:25 reverse stock split effective on July 25, 2015), which
conversion was completed on April 25, 2016. We paid the holder $20,000 in connection with and effective upon such conversion in
order to comply with the terms of the Asset Purchase Agreement that required that no shares of Series A Convertible Preferred Stock
be outstanding at the closing. As of September 30, 2016, we have no Series A Convertible Preferred Stock issued or outstanding.

14

Series B Redeemable Convertible Preferred Stock

On September 1, 2016,
as consideration for the closing of the Acquisition, the Company issued an aggregate of 552,000 shares of Redeemable Convertible
Preferred Stock (the “Preferred Shares”), which had a total value of $13,800,000 based on the $25 per Series B Preferred
Stock share par value. The Preferred Shares were issued to the following parties and in the following amounts on behalf of and
for the benefit of RAD2 Minerals:

The Series B Preferred
Stock has a liquidation preference of $25 per share. The Series B Preferred Stock is convertible, at the option of the holder at
any time following the original issuance date, into common stock at a rate of approximately 7.14:1 (issuable into an aggregate
of 3,942,857 shares of common stock if fully converted), at the option of the holder thereof, or automatically as to 25% of the
Series B Preferred Stock shares if our common stock trades above $6.125 per share for at least 20 consecutive trading days, and
trades with at least 75,000 shares of average volume per day during such period; an additional 50% of the Series B Preferred Stock
shares if our common stock trades above $7.00 per share for at least 20 consecutive trading days, and trades with at least 75,000
shares of average volume per day during such period; and as to the remaining Series B Preferred Stock shares, if our common stock
trades above $7.875 per share for at least 20 consecutive trading days, and trades with at least 75,000 shares of average volume
per day during such period. Each outstanding share of Series B Preferred Stock will be entitled to one vote per share on all stockholder
matters. The Series B Preferred Stock is redeemable at any time by the Company upon the payment by the Company of the face amount
of the Series B Preferred Stock ($25 per share) plus any and all accrued and unpaid dividends thereon.

The Company has the
option, exercisable from time to time after the original issue date, to redeem all or any portion of the outstanding shares of
Series B Preferred Stock by paying each applicable holder, an amount equal to the original issue price multiplied by the number
of Series B Preferred shares held by each applicable holder plus the accrued dividends.

The 552,000 shares
of Series B Preferred Stock have the following features:

●

a liquidation preference senior to all of the Company’s common stock;

●

a dividend, payable annually, at an annual rate of six percent (6%) of the original issue price until such Series B Preferred Stock is no longer outstanding either due to conversion, redemption or otherwise; and

●

voting rights on all matters, with each share having 1 vote.

As the Series B Preferred
Stock is convertible at any time following the original issuance date into common stock at a rate of approximately 7.14:1, the
Company recognized a fair value measurement of $14,898,038 for the Series B Preferred Stock, which is based on the 552,000 preferred
shares issued times the conversion rate of approximately 7.14, times the price of the Company’s common stock of $3.78 per
share at the date of the closing of the Acquisition on August 25, 2016.

Series C Redeemable Convertible Preferred Stock

On April 6, 2016, we
entered into a Stock Purchase Agreement with the Investor (defined above in Note 6 – Notes Payable and Debenture), pursuant
to which we agreed, subject to certain conditions, to sell 527 shares of Series C redeemable convertible preferred stock (with
a face value of $5.26 million) at a 5% original issue discount of $263,000, convertible into 1,618,462 shares of common stock at
a conversion price of $3.25 per share, and a warrant to purchase 1,111,112 shares of common stock at an exercise price of $4.50
per share (the “Second Warrant”).

Effective September
2, 2016, and under the terms of the Stock Purchase Agreement, the Second Warrant and 53 shares of Series C Preferred Stock were
issued for $526,450 ($500,000, net cash to Lucas) after the Acquisition (as defined and described in Note 2 – Liquidity
and Going Concern Considerations) closed. The prorated share of the $263,000 discount ($26,000) was recorded to interest
expense in the current period. The remaining 474 shares of Series C Preferred Stock will be sold and issued for $4.5 million immediately
after there is an effective registration statement covering the shares of common stock issuable upon conversion of the Series C
Preferred Stock and exercise of the Second Warrant, subject to the approval of the Investor and the Company.

15

The holder of the Series
C Preferred Stock will be entitled to cumulative dividends through maturity, in the amount of 6.0% per annum (adjustable as provided
in the Certificate of Designations up to approximately 25% per annum), payable upon redemption, conversion, or maturity, and when,
as and if declared by our Board of Directors in its discretion. The Series C Preferred Stock ranks senior to the common stock and
pari passu with respect to our Series B Redeemable Convertible Preferred Stock.

The Series C Preferred
Stock may be converted into shares of common stock at any time at the option of the holder, or at our option if certain equity
conditions (as defined in the Certificate of Designation) are met. Upon conversion, we will pay the holder of the Series C Preferred
Stock being converted an amount, in cash or stock at our sole discretion, equal to the dividends that such shares would have otherwise
earned if they had been held through the maturity date (7 years), and issue to the holder such number of shares of common stock
equal to $10,000 per share of Series C Preferred Stock (the “Face Value”) multiplied by the number of such shares of
Series C Preferred Stock divided by the conversion rate ($3.25 per share).

The conversion premium
under the Series C Preferred Stock is payable and the dividend rate under the Series C Preferred Stock is adjustable on the same
terms and conditions as accrued interest is payable and adjustable under the Debenture. The Series C Preferred Stock has a maturity
date that is seven years after the date of issuance and, if the Series C Preferred Stock has not been wholly converted into shares
of common stock prior to such date, we may redeem the Series C Preferred Stock on such date by repaying to the holder in cash 100%
of the Face Value plus an amount equal to any accrued but unpaid dividends thereon. 100% of the Face Value, plus an amount equal
to any accrued but unpaid dividends thereon, automatically becomes payable in the event of a liquidation, dissolution or winding
up by us.

Common Stock

The following summarizes
the Company’s common stock activity during the six-month period ended September 30, 2016:

Common Shares

Amount (a)

Per Share

Issued and Outstanding Shares

Balance at March 31, 2016

1,605,224

Conversion of Debt

$

832,129

$

1.50

554,752

Preferred Stock Series A Conversion

773,900

38.70

20,000

Acquisition Shares

49,176,530

3.78

13,009,664

Lender Shares

1,455,782

3.73

390,290

Dreeben Note Shares

48,000

3.20

15,000

Share-Based Compensation

47,454

3.40

13,938

Balance at September 30, 2016

15,608,868

(a)

Net proceeds or fair value on grant date, as applicable.

See Note 10 –
Share-Based Compensation for information on common stock activity related to Share-Based Compensation, including shares granted
to the board of directors, officers, employees and consultants.

16

Warrants

During the six months
ended September 30, 2016, warrants to purchase 1,384,616 shares of common stock were granted in connection with our sale of the
debenture noted in Note 6 – Note Payables and Debenture and warrants to purchase 1,111,112 shares of common stock at an exercise
price of $4.50 per share were granted in connection with our sale of 53 shares of Series C Preferred Stock noted above. We also
granted warrants to purchase 124,285 shares of common stock in connection with the HFT Convertible Promissory Notes (see Note 6
– Note Payables and Debenture”). No warrants were exercised or cancelled during the six months ended September 30,
2016, provided that warrants to purchase 100,420 shares of common stock at an exercise price of $71.50 per share expired unexercised
on July 4, 2016. Additionally, warrants to purchase 66,668 shares of common stock issued in connection with an equity raise completed
in April 2014, contained a weighted average anti-dilutive provision in which the exercise price of the warrants are adjusted downward
based on any subsequent issuance or deemed issuance of common stock or convertible securities by the Company for consideration
less than the then exercise price of such warrants. As a result of the anti-dilution rights, the exercise price of the warrants
was adjusted from $9.75 per share as of June 30, 2016 to $3.59 per share as of September 30, 2016, in connection with an automatic
adjustment to the exercise price due to our acquisition on August 28, 2016. As of September 30, 2016, the fair value of the derivative
liability associated with the 66,668 warrants was $160,040 compared to $182,333 at June 30, 2016. Therefore, the $22,293 change
in the derivative liability fair value was recorded as other income on the consolidated statement of operations.

The following is a summary of the Company’s
outstanding warrants at September 30, 2016:

Warrants

Exercise

Expiration

Intrinsic Value at

Outstanding

Price ($)

Date

September 30, 2016

41,300

(1)

57.50

October 18, 2017

$

—

11,000

(2)

37.50

April 4, 2018

—

2,000

(3)

37.50

May 31, 2018

—

11,195

(4)

0.01

August 13, 2018

33,473

66,668

(5)

3.59

April 21, 2019

—

1,384,616

(6)

3.25

April 6, 2023

—

124,285

(7)

1.50

April 21, 2021

186,428

1,111,112

(8)

4.50

September 2, 2023

—

2,752,176

$

219,901

(1)

Warrants issued in connection with the sale of units in the Company’s unit offering in April
2012. The warrants became exercisable on October 18, 2012, and will remain exercisable thereafter until October 18, 2017.

(2)

Warrants issued in connection with the issuance of certain notes in April 2013, of which the outstanding
principal and interest was paid in full on August 16, 2013. The warrants were exercisable on the grant date (April 4, 2013) and
remain exercisable until April 4, 2018.

(3)

Warrants issued in connection with the issuance of certain notes in May 2013, of which the outstanding
principal and interest was paid in full on August 16, 2013. The warrants were exercisable on the grant date (May 31, 2013) and
remain exercisable until May 31, 2018.

(4)

Warrants issued in connection with the Letter Loan. The warrants were exercisable on the grant
date (August 13, 2013) and remain exercisable until the earlier of (a) August 13, 2018; and (b) three years after the payment in
full of the Loan. The exercise price was lowered to $0.01 per share on August 12, 2015.

(5)

Warrants issued in connection with the sale of units in the Company’s unit offering in April
2014. The Warrants became exercisable on April 21, 2014 and will remain exercisable thereafter until April 21, 2019.

(6)

Warrants issued in connection with the Debenture, which accrues a premium at an initial rate equal
to 6.0% per annum (adjustable up to approximately 25% per annum). The premium rate has subsequently increased to 17% due to certain
triggering events and a decline in our stock price. The warrants were exercisable on the grant date (April 6, 2016) and remain
exercisable until April 6, 2023. The warrants were subsequently exercised on October 7, 2016 (see Note 12 – Subsequent Events,
below).

(7)

Warrants issued in connection with the HFT Convertible Promissory Notes. The warrants were exercisable
on the grant date (April 26, 2016) and remain exercisable until April 26, 2021.

(8)

Warrants issued in connection with the sale of Series C Preferred Stock. The warrants were exercisable
on the grant date (September 2, 2016) and remain exercisable until September 2, 2023.

17

NOTE 9 – INCOME TAXES

The Company has
estimated that its effective tax rate for U.S. purposes will be zero for the 2017 fiscal year and consequently, recorded no provision
or benefit for income taxes for the six months ended September 30, 2016.

NOTE 10 – SHARE-BASED COMPENSATION

Lucas measures the
cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award
over the vesting period.

Common Stock

Lucas issued 13,938
shares of its common stock with an aggregate grant date fair value of $47,454 during the six-month period ended September 30, 2016,
which were valued based on the trading value of Lucas’s common stock on the date of grant. Also, on September 30, 2016, the
Company agreed to award an additional 8,193 shares of its common stock with an aggregate grant fair value of $24,580, which were
valued based on the trading value of Lucas’s common stock on the date of grant. Those common stock awards had yet to be physically
issued as of September 30, 2016, and therefore, were recognized as accrued common stock payable on the balance sheet. The shares
were awarded according to the employment agreement with an officer and as additional compensation for other managerial personnel.

Stock Options

As of September 30,
2016 and 2015, the Company had 22,920 stock options outstanding with a weighted average exercise price of $33.96, respectively.

Of the Company’s
outstanding options, no options expired, were exercised or forfeited during the six months ended September 30, 2016. Additionally,
no stock options were granted during the six months ended September 30, 2016. Compensation expense related to stock options during
the six-month period ended September 30, 2016 was $9,633.

Options outstanding
and exercisable at September, 30, 2016 and 2015 had no intrinsic value, respectively. The intrinsic value is based upon the difference
between the market price of Lucas’s common stock on the date of exercise and the grant price of the stock options.

The following tabulation
summarizes the remaining terms of the options outstanding:

Exercise

Remaining

Options

Options

Price ($)

Life (Yrs.)

Outstanding

Exercisable

24.50

0.2

3,000

3,000

40.75

1.1

4,000

3,000

43.50

1.1

6,000

6,000

39.50

1.1

2,000

2,000

40.25

1.3

2,000

2,000

5.50

1.5

4,000

4,000

51.75

4.0

1,920

1,920

Total

22,920

21,920

As of September 30,
2016, total unrecognized stock-based compensation expense related to all non-vested stock options was $20,871, which is being recognized
over a remaining weighted average period of approximately 1.0 years.

18

In prior periods, the
shareholders of the Company approved the Company’s 2014 (as amended), 2012 and 2010 Stock Incentive Plans (“the Plans”).
The Plans are intended to secure for the Company the benefits arising from ownership of the Company’s common stock by the
employees, officers, directors and consultants of the Company, all of whom are and will be responsible for the Company’s
future growth. The Plans provide an opportunity for any employee, officer, director or consultant of the Company to receive incentive
stock options (to eligible employees only), nonqualified stock options, restricted stock, stock awards and shares in performance
of services. There are 72,997 shares available for issuance under the Plans as of September 30, 2016.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

Office Lease. In
June 2016, we moved our corporate headquarters from Suite 780 to Suite 860 at our same physical address location of 450 Gears Road,
Houston, Texas 77067. The new office space is approximately 4,400 square feet and has a base monthly rent of approximately $7,700
for the first year and approximately $7,900, $8,000, $8,200 and $8,400 for subsequent years. We also paid an $8,400 deposit and
received proceeds from our prior security deposit of $5,000.

Legal Proceedings.
From time to time, we may become party to litigation or other legal proceedings that we consider to be a part of the ordinary course
of our business. We are not currently involved in any legal proceedings that we believe could reasonably be expected to have a
material adverse effect on our business, prospects, financial condition or results of operations. We may become involved in material
legal proceedings in the future.

NOTE 12 – SUPPLEMENTAL CASH FLOW INFORMATION

Net cash paid for interest and income taxes
was as follows for the six-month periods ended September 30, 2016 and 2015:

Six Months Ended September 30,

2016

2015

Interest

$

193,106

$

73,769

Income taxes

—

—

Non-cash investing and financing activities
for the three-month periods ended June 30, 2016 and 2015 included the following:

Six Months Ended September 30,

2016

2015

Reduction in Accounts Payable for Payments Made on Previously
Accrued Capital Expenditures

On October 4, 2016,
HFT Enterprises, LLC (“HFT”), converted $464,800 of the principal and interest due on convertible notes into shares
of our common stock at a conversion price of $1.50 per share, for an aggregate of 309,866 shares.

On October 7, 2016,
the Investor exercised the First Warrant in full and was due 1,384,616 shares of common stock upon exercise thereof and an additional
2,252,735 shares of common stock in consideration for the conversion premium due thereon. A total of 810,000 shares were issued
to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in
the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company
received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services
rendered in connection with the First Warrant.

Due to the recent decline
in the price of our common stock and the trigger event that occurred on June 30, 2016 as a result of the delay in filing our Annual
Report on Form 10-K for the year ended March 31, 2016, the premium rate on the First Warrant increased from 6% to 17% and the conversion
discount became 85% of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common
stock not to exceed 85% of the lowest sales prices on the last day of such period less $0.10 per share (the “VWAP Calculation”).
As a result, the total number of shares issued or held in abeyance for issuance for the exercise and payment of conversion premium
under the First Warrant may increase during the measuring period. The measuring period continues until the date ending 60 days
after we deliver to the Investor the total shares due. The debenture and Series C Preferred Stock held by the Investor are similarly
impacted.

On October 19, 2016,
the Investor notified the Company of an adjustment to the calculation of the conversion premium triggered by a reduction in the
trading price of the Company’s common stock, which resulted in an additional 1,630,751 shares of common stock (5,558,102
shares in aggregate, including shares previously issued) being due in connection with such exercise and the payment of the conversion
premium. Also on October 19, 2016, we issued the Investor an additional 870,000 shares of common stock in connection with the October
7, 2016 exercise of the First Warrant.

On October 27, 2016,
the Investor notified the Company of another adjustment to the calculation of the conversion premium triggered by a further reduction
in the trading price of the Company’s common stock, which resulted in an additional 826,981 shares of common stock (6,385,083
shares in aggregate, including shares previously issued) being due in connection with such exercise and the payment of the conversion
premium. Also on October 27, 2016, we issued the Investor an additional 920,000 shares of common stock in connection with the October
7, 2016 exercise of the First Warrant. Since October 27, 2016, the trading price of our common stock has further declined, triggering
a further reduction in the conversion price of the conversion premium and an increase in the number of shares due the Investor
in connection with the conversion of the amount owed in connection with the conversion premium.

The remainder of the
shares of common stock due to the Investor are continued to be held in abeyance until such time as it would not result in the Investor
exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock).

On October 11, 2016,
the Company paid Rogers the full amount of principal due on the promissory note entered into on August 25, 2016 (see Note 6 –
Notes Payable and Debenture) of $1.0 million and also paid the full amount of interest due of $15,667 on such promissory note on
October 13, 2016.

On October 13, 2016,
the Company paid RAD2 the full amount of principal $1.5 million due on the promissory note entered into on August 25, 2016 (see
Note 6 – Notes Payable and Debenture) of $1.5 on October 14, 2016, the Company paid the remaining $215,000 due on the advance
from RAD2 (see Note 7 – Advances Payable).

On October 31, 2016,
we entered into an amendment, the parties agreed to extend the maturity date from October 31, 2016 to January 31, 2017. We also
agreed to pay $9,000 to Ms. Rogers and $9,000 to Robertson Global Credit, LLC, the servicer of the Amended Note, in connection
with our entry into the amendment.

20

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS

This report contains
forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, (the “Securities
Act”) and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). These forward-looking
statements are generally located in the material set forth below under the headings “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” but may be found in other locations as well. For
a more detailed description of the risks and uncertainties involved, the following discussion and analysis should be read in conjunction
with management’s discussion and analysis contained in Lucas’s Annual Report on Form 10-K for the fiscal year ended
March 31, 2016 (the “2016 Annual Report”) and related discussion of our business and properties contained therein.

These forward-looking
statements are subject to risks and uncertainties and other factors that may cause our actual results, performance or achievements
to be materially different from the results, performance or achievements expressed or implied by the forward-looking statements.
You should not unduly rely on these statements. Factors, risks, and uncertainties that could cause actual results to differ materially
from those in the forward-looking statements which include, among others:

our financial position, business strategy and other plans and objectives for future operations.

We identify forward-looking
statements by use of terms such as “may,” “will,” “expect,” “anticipate,” “estimate,”
“hope,” “plan,” “believe,” “predict,” “envision,” “intend,”
“continue,” “potential,” “should,” “confident,” “could” and similar
words and expressions, although some forward-looking statements may be expressed differently. You should be aware that our actual
results could differ materially from those contained in the forward-looking statements. You should consider carefully the statements
under the “Risk Factors” section of this report and other sections of this report which describe factors that could
cause our actual results to differ from those set forth in the forward-looking statements, and the following factors:

●

the possibility that our future acquisitions may involve unexpected costs;

●

the volatility in commodity prices for oil and gas;

●

the accuracy of internally estimated proved reserves;

●

the presence or recoverability of estimated oil and gas reserves;

●

the ability to replace oil and gas reserves;

●

the availability and costs of drilling rigs and other oilfield services;

21

●

risks inherent in natural gas and oil drilling and production activities, including risks of fire,
explosion, blowouts, pipe failure, casing collapse, unusual or unexpected formation pressures, environmental hazards, and other
operating and production risks;

●

delays in receipt of drilling permits;

●

risks relating to the availability of capital to fund drilling operations that can be adversely
affected by adverse drilling results, production declines and declines in natural gas and oil prices;

●

risks relating to unexpected adverse developments in the status of properties;

●

risks relating to the absence or delay in receipt of government approvals or other third party
consents;

●

risks relating to governmental regulations regarding hydraulic fracturing and the disposition/disposal
of produced water;

●

environmental risks;

●

exploration and development risks;

●

competition;

●

the inability to realize expected value from acquisitions;

●

the availability and cost of alternative fuel sources;

●

our ability to maintain the listing of our common stock on the NYSE MKT;

●

our limited market capitalization;

●

the ability of our management team to execute its plans to meet its goals; and

Forward-looking statements
speak only as of the date of this report or the date of any document incorporated by reference in this report. Except to the extent
required by applicable law or regulation, we do not undertake any obligation to update forward-looking statements to reflect events
or circumstances after the date of this report or to reflect the occurrence of unanticipated events.

Review of Information and Definitions

This information should
be read in conjunction with the interim unaudited financial statements and the notes thereto included in this Quarterly Report
on Form 10-Q, and the consolidated financial statements and notes thereto and Part II, Item 7, Management’s Discussion and
Analysis of Financial Condition and Results of Operations contained in our Annual Report on Form 10-K for the year ended March
31, 2016.

Certain capitalized
terms used below and otherwise defined below, have the meanings given to such terms in the footnotes to our consolidated financial
statements included above under “Part I - Financial Information” - “Item 1. Financial Statements”.

Overview

Lucas Energy, Inc.,
a Nevada corporation, is an independent oil and natural gas company based in Houston, Texas (herein the “Company”,
“Lucas”, “Lucas Energy”, “our” or “we”). We are engaged in the acquisition, development
and sale of crude oil, natural gas and natural gas liquids from various known productive geological formations, including the Austin
Chalk and Eagle Ford formations, primarily in Gonzales County, Texas; the Cline shale and upper Wolfberry shale in Glasscock County,
Texas; and the Hunton formation in Lincoln, Logan and Payne Counties, Oklahoma.

We continue to execute
on our business plan to operate in a low price commodity environment by balancing overall costs while pursuing strategic acquisitions.
Our operational and development activities focus on improving production rates, developing our reserves, increasing revenue, and
expanding our inventory of exploration opportunities. The Company has prudently emphasized minimum capital outlays during the lingering
price downturn. In October 2016, the Company started maintenance and upgrade program budgeted at $0.5 million. The program includes
the repair and/or the replacement of down-hole pumps in addition to mechanical repairs in Oklahoma, and maintenance operations
to certain existing wells in Texas. Lucas expects to continue maintenance operations as it reviews new well drilling locations
in its core areas of operation.

22

The Company is also
executing on an aggressive growth strategy by building on the platform created by our recent asset acquisition (described below).
We intend to create a growth company capable of delivering on the long expected conversion of reserves to production, continued
long-term acreage development and sustainable shareholder value.

Our website address
is http://www.lucasenergy.com. Our fiscal year ends on the last day of March of each year. The
information on, or that may be accessed through, our website is not incorporated by reference into this report and should not be
considered a part of this report. We refer to the twelve-month periods ended March 31, 2017 and March 31, 2016 as our 2017
Fiscal Year and 2016 Fiscal Year, respectively.

Prior to September
30, 2016, the Company had leasehold interests (working interests) in approximately 7,416 gross acres, or 7,333 net acres, which
is the Company’s total net developed and undeveloped acreage as measured from the surface to the base of the Austin Chalk
formation. In deeper formations, the Company has approximately 1,361 net acres in the Eagle Ford oil window. With the closing of
our recent asset acquisition in August 2016, the Company acquired additional working interest in approximately 13,441 net acres
in the Coyle, Twin Cities and Goodnight fields in Oklahoma and the Glasscock field in west Texas for a total of 20,774 net acres
as of September 30, 2016.

As of September 30
2016, Lucas was producing an average of approximately 206 net barrels of oil equivalent per day (Boepd) from over 100 active well
bores. The ratio between the gross and net production varies due to varied working interests and net revenue interests in each
well. Our production sales totaled 34,260 barrels of oil equivalent, net to our interest, for the period ended September 30, 2016.

At March 31, 2016,
Lucas’s total estimated proved reserves were 4.3 million barrels of oil equivalent (“Boe”), of which 3.8 million
barrels (“Bbls”) were crude oil reserves, and 2.5 billion cubic feet (“Bcf”) were natural gas reserves.
Approximately 3% of the barrel of oil equivalent (“Boe”) was proved producing. With the closing of our recent asset
acquisition in August 2016, the Company acquired additional estimated proved reserves of 6.3 million barrels of oil equivalent
(“Boe”), of which 0.2 million barrels (“Bbls”) were crude oil reserves, 14.8 billion cubic feet (“Bcf”)
were natural gas reserves and 3.7 million barrels (“Bbls”) were natural gas liquids. Approximately 72% of the barrel
of oil equivalent (“Boe”) was proved producing.

As of September 30,
2016, Lucas employed seven full-time employees. We also utilized nine contractors on an “as-needed” basis to carry
out various functions of the Company, including but not limited to field operations, land administration, corporate activity and
information technology maintenance.

Industry Segments

Lucas Energy’s operations are all
crude oil and natural gas exploration and production related.

Operations and Oil and Gas Properties

We
operate and invest in areas that are known to be productive, with a reasonably established production history, in order to decrease
geological and exploratory risk. Our activities in the Gulf Coast areas of Texas are concentrated on two adjoining formations:
the Austin Chalk and Eagle Ford. Lucas’s acreage position is in the oil window of the Eagle Ford trend and we currently have
approximately 7,300 net acres in the Gonzales, Karnes and Wilson County, Texas areas, all of which are held by production. With
the closing of our recent asset acquisition in August 2016, the Company acquired over 13,000 net acres in producing fields located
primarily in the Mid-Continent region of Oklahoma including Payne, Lincoln and Logan Counties, along with a small amount of interest
in production located in Glasscock County, Texas. The Mid-Continent assets produce from a liquids-rich, gas reservoir known as
the Hunton formation. These properties include interests in four different fields, of which one is operated by Lucas and the other
three are non-operated. The Glasscock County, Texas properties produce oil and gas primarily from the Wolfcamp and Fusselman formations
and are all non-operated.

Our Strategic Plan

The
following provides an overview of our strategic plan, which includes our oil and natural gas projects. While actively pursuing
specific exploration and development activities in the Mid-Continent area, we may not be able to close future acquisitions for
a variety of reasons, new drilling opportunities may not be identified and any new drilling opportunities identified may not be
successful if drilled.

23

On August 25, 2016,
Lucas closed the acquisition of certain working interests in producing properties and undeveloped acreage in Texas and Oklahoma,
including varied interests in two contiguous acreage blocks in the liquids-rich Mid-Continent region of the United States from
Segundo Resources LLC (“Segundo”) and other sellers (together, the “Assets”). Lucas entered into an Asset
Purchase Agreement on December 30, 2015 with Segundo as the representative of 21 separate working interest owners (later increased
to 23 sellers). The Assets currently produce over one thousand net barrels of oil equivalent per day (BOE/d), of which approximately
53% are liquids that are primarily from the Hunton formation.

In consideration for
the purchase of the Assets, we assumed approximately $30.6 million of commercial bank debt and (i) issued to certain of the Sellers
(a) 552,000 shares of Series B Redeemable Preferred Stock convertible into 3,941,280 shares of common stock and (b) 13,009,664
shares of restricted common stock; and (ii) paid certain of the Sellers $4,975,000 in cash.

The completion of this
transaction increased our production significantly and represents our “platform for growth” which has the goal of providing
stable, long-lived reserves with substantial production and ample drilling opportunities. During this continued weak commodity
price environment, Lucas intends to further develop the Assets as well as aggressively pursue attractively-priced acquisitions
that would incrementally increase our overall production and/or expand our drilling acreage, funding permitting.

Drilling new wells
in the current environment requires a constant evaluation of commodity prices against drilling costs to ensure economic viability.
Specifically, in south Gonzales County, Texas, the Company participated in the Cyclone #9H and #10H Eagle Ford shale wells originally
estimated to cost an average of $5.2 million, but the actual cost to drill and complete the wells was only $4.7 million. This compares
to an average of $8.2 million in 2014. Lucas will continue to monitor both the forecasts for commodity prices as well as drilling
costs in our areas of operation. To that end, we continue to review targeted drilling locations in Oklahoma and anticipate drilling
in the first quarter of calendar 2017.

We continue to supplement
our operations in the Austin Chalk/Eagle Ford Shale in Gonzales, Texas, where leading Eagle Ford operators have developed technologies
that have significantly reduced per unit drilling and completion costs.

Beyond our targeted
Hunton locations, there are 19 different sands that have produced in various areas of central Oklahoma. Potential exists to develop
other sands such as shallow Pennsylvanian formations, like the Bartlesville, the Redfork and the Skinner, the Mississippi Lime
in addition to the Woodford shale and the Prue Sand.

Another aspect of our
growth plan is to acquire opportunities within or near our existing operations. By pursuing other interest owners to add to our
working interest or adjacent properties to acquire, we can expand our acreage footprint and capitalize on cost efficiencies.

We believe the Assets
serve as the foundation to grow Lucas. We also believe that the current disruption in the oil and gas industry creates an opportunity
to pursue attractively-priced acquisitions and expand the Company’s range of exploration acreage, funding permitting. Lucas
will work diligently to grow its operations by considering strategic acquisitions that are near the region or location of our current
Assets, offer attractive production and cash flow returns, and/or conform to the Company’s technical proficiencies.

Lucas is targeting
acquisitions primarily in the southwest United States inclusive of Oklahoma, Texas and New Mexico that represent a vast array of
oil and gas deposits. As we consider producing properties, we prioritize those with cash flow returns near our current assets that
can substantially improve our bottom line. In addition, we evaluate the property to determine whether it conforms to our experience
and technical expertise. Specifically, we prefer relatively shallow (less than 10,000 feet) formations that require horizontal
drilling techniques and significant surface infrastructure management. We are currently evaluating several opportunities to expand
our asset acreage. The ultimate success of each transaction will be significantly dependent upon arriving at acceptable terms and
the availability of capital, which may not be available on favorable terms, if at all.

24

In the current commodity
price environment, we do not generate enough income from our current operations to cover our overhead burden. We have recently
made significant strides in improving production from our existing fields. Continued improvement in revenue and cash flow will
need to come from new production which is expected to ramp up in early 2017.

The Company has a team
of highly experienced management and personnel in its operations, reservoir analysis, land and accounting functions. We believe
we have compiled a professional and dedicated team to deliver value to Lucas’s shareholders.

Finally, as a culmination
of our successful business transformation, we intend to rebrand and change our name to “Camber Energy, Inc.” beginning
in late 2016 or early 2017. The rebranding formalizes a strategic shift in Lucas’s strategy to expand outside its traditional
Austin Chalk focus into other low-risk, economically-viable reservoir opportunities. We believe the name “Camber” represents
the transformation of our Company into a more aggressively-focused acquirer of assets and acreage and is a name that best communicates
the fundamental changes within our production mix.

Liquidity and Going Concern Consideration

On December 30, 2015,
we entered into an Asset Purchase Agreement, as amended from time to time (the “Asset Purchase Agreement”), to acquire,
from twenty-three different entities and individuals (the “Sellers”), working interests in producing properties and
undeveloped acreage, which acquisition transaction was completed on August 25, 2016. The assets acquired include varied interests
in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region. In connection with the closing of the acquisition,
we assumed approximately $30.6 million of commercial bank debt, issued 13,009,664 shares of common stock to certain of the Sellers,
issued 552,000 shares of Series B Preferred Stock to one of the Sellers and its affiliate, and paid $4,975,000 in cash to certain
of the Sellers. The effective date of the acquisition (the “Acquisition”) was April 1, 2016.

Pursuant to a Letter
Agreement we entered into at the closing of the Acquisition with RAD2 Minerals, Ltd. (“RAD2”), one of the Sellers,
which is owned and controlled by Richard N. Azar II, who was appointed as our Chairman on August 26, 2016, RAD2 agreed to accept
full liability for any and all deficiencies between the “Agreed Assets Value” set forth in the Asset Purchase Agreement
of $80,697,710, and the mutually agreed upon value of the assets delivered by the Sellers at the closing of the Acquisition, up
to an aggregate of $1,030,941 (as applicable, the “Deficiency”).

Effective August 25,
2016, we, as borrower, and Mr. Azar, Donnie B. Seay, Richard E. Menchaca, RAD2, DBS Investments, Ltd. (“DBS”, controlled
by Mr. Seay) and Saxum Energy, LLC (“Saxum”, which is controlled by Mr. Menchaca), as guarantors (collectively, the
“Guarantors”, all of which are directly or indirectly Sellers), and International Bank of Commerce, as Lender (“Lender”),
entered into a Loan Agreement (the “Loan Agreement”).

Pursuant to the Loan
Agreement, the Lender loaned us $40 million (“Loan”), evidenced by a Real Estate Lien Note in the amount of $40 million
(the “Note”). We are required to make monthly payments under the Note equal to the greater of (i) $425,000; and (ii)
fifty percent (50%) of our monthly net income. The Note accrues annual interest at 2% above the prime rate then in effect, subject
to a minimum interest rate of 5.5% per annum. The Note is due and payable on August 25, 2019. Payments under the Note are subject
to change as the interest rate changes in order to sufficiently amortize the Note in 120 monthly installments. We have the right,
from time to time and without penalty to prepay the Note in whole or in part, subject to the terms thereof.

The proceeds of the
Loan were used to repay and refinance approximately $30.6 million of indebtedness owed by certain of the Sellers, to the Lender
(including an aggregate of $18.3 million owed by RAD2 and another entity controlled by Mr. Azar, $9.8 million owed by DBS, and
$2.1 million owed by Mr. Menchaca), as well as to pay the $4.975 million due to the Sellers at closing. Another $3.36 million was
used to fund a sinking fund required by the Lender, as discussed below, to pay principal on the Note.

The amount owed under
the Note is secured by a Security Interest in substantially all of our assets and properties, pursuant to three Security Agreements.

25

On April 6, 2016, we
entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an accredited institutional
investor (the “Investor”), pursuant to which we sold and issued a redeemable convertible subordinated debenture, with
a face amount of $530,000, initially convertible into 163,077 shares of common stock at a conversion price equal to $3.25 per share
(the “Debenture”) and a warrant to initially purchase 1,384,616 shares of common stock (subject to adjustment thereunder)
at an exercise price equal to $3.25 per share (the “First Warrant”). The Investor purchased the Debenture at a 5.0%
original issue discount for the sum of $500,000 and has exercised the First Warrant for the sum of $4.5 million.

Also on April 6, 2016,
we entered into a Stock Purchase Agreement (the “Stock Purchase Agreement”) with the Investor, pursuant to which we
agreed, subject to certain conditions, to issue 527 shares of Series C redeemable convertible preferred stock (the “Series
C Preferred Stock”) at a 5% original issue discount, convertible into 1,618,462 shares of common stock at a conversion price
of $3.25 per share, and a warrant to purchase 1,111,112 shares of common stock at an exercise price of $4.50 per share (the “Second
Warrant”). Under the terms of the Stock Purchase Agreement, the Second Warrant and 53 shares of Series C Preferred Stock
were sold and issued for $500,000 on September 2, 2016, and the remaining 474 shares of Series C Preferred Stock will be sold and
issued for $4.5 million immediately after there was an effective registration statement covering the shares of common stock issuable
upon conversion of the Series C Preferred Stock, subject to the approval of the Investor and the Company.

In July and August
2016, RAD2 advanced the Company an aggregate of $350,000. Also, in August 2016, two other Sellers advanced the Company an aggregate
of $200,000 ($100,000 each). These advances did not accrue interest and had no stated maturity date. Additionally, in August 2016,
RAD2 loaned us $1.5 million pursuant to a promissory note. The promissory note did not accrue interest for the first month it was
outstanding and accrued interest at the rate of 5% per annum thereafter until paid in full. As of the date of this report, the
Company has repaid the promissory note in full and fully repaid all amounts advanced by RAD2 and the two other Sellers.

On October 7, 2016,
the Investor exercised the First Warrant in full and was due 1,384,616 shares of common stock upon exercise thereof and an additional
2,252,735 shares of common stock in consideration for the conversion premium due thereon. A total of 810,000 shares were issued
to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in
the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company
received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services
rendered in connection with the First Warrant. On October 19, 2016, the Investor notified the Company of an adjustment to the calculation
of the conversion premium triggered by a reduction in the trading price of the Company’s common stock, which resulted in
an additional 1,630,751 shares of common stock (5,558,102 shares in aggregate, including shares previously issued) being due in
connection with such exercise and the payment of the conversion premium. Also on October 19, 2016, we issued the Investor an additional
870,000 shares of common stock in connection with the October 7, 2016 exercise of the First Warrant. On October 27, 2016, the Investor
notified the Company of another adjustment to the calculation of the conversion premium triggered by a further reduction in the
trading price of the Company’s common stock, which resulted in an additional 826,981 shares of common stock (6,385,083 shares
in aggregate, including shares previously issued) being due in connection with such exercise and the payment of the conversion
premium. Also on October 27, 2016, we issued the Investor an additional 920,000 shares of common stock in connection with the October
7, 2016 exercise of the First Warrant. Since October 27, 2016, the trading price of our common stock has further declined, triggering
a further reduction in the conversion price of the conversion premium and an increase in the number of shares due the Investor
in connection with the conversion of the amount owed in connection with the conversion premium.

In addition to the
transactions noted above, Lucas is currently discussing potential financing transactions in order to fulfill our current capital
requirements, which we believe, if finalized and completed, will ensure the future viability of the Company, provided however,
that we are prohibited from raising capital, subject to certain limited exceptions until sixty days after the Company’s registration
statement to register the shares of common stock underlying the Second Warrant and 53 shares of Series C redeemable convertible
preferred stock has been declared effective. Additionally, due to our current capital structure and the nature of oil and gas interests,
i.e., that rates of production generally decline over time as oil and gas reserves are depleted, if we are unable to obtain the
necessary financing to drill additional wells and develop our proved undeveloped reserves (PUDs); coupled with the continued substantial
drop in commodity prices over the last twelve months, we believe that our revenues will continue to decline over time. Therefore,
we may be forced to scale back our business plan, sell assets to satisfy outstanding debts or take other remedial steps which may
include seeking bankruptcy protection.

26

If the Company is required
to seek financing, we may be prohibited from undertaking certain types of funding transactions by our prior funding agreements,
such financings may not be available or, if available, may not be on terms acceptable to the Company. Accordingly, the financial
statements do not include any adjustments related to the recoverability of assets or classification of liabilities that might be
necessary should the Company be unable to continue as a going concern. The ability of the Company to continue as a going concern
is dependent upon its ability to raise capital to meet its obligations and develop its oil and gas properties to attain profitable
operations.

These conditions raise
substantial doubt about our ability to continue as a going concern for the next twelve months. The accompanying financial statements
have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern
basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly,
the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities
that might be necessary should the Company be unable to continue as a going concern.

Market Conditions and Commodity Prices

Our financial results
depend on many factors, particularly the price of natural gas and crude oil and our ability to market our production on economically
attractive terms. Commodity prices are affected by many factors outside of our control, including changes in market supply and
demand, which are impacted by weather conditions, inventory storage levels, basis differentials and other factors. As a result,
we cannot accurately predict future commodity prices and, therefore, we cannot determine with any degree of certainty what effect
increases or decreases in these prices will have on our production volumes or revenues. In addition to production volumes and commodity
prices, finding and developing sufficient amounts of natural gas and crude oil reserves at economical costs are critical to our
long-term success. We expect prices to remain volatile for the remainder of the year. For information about the impact of realized
commodity prices on our crude oil revenues, refer to “Results of Operations” below.

RESULTS OF OPERATIONS

The following discussion
and analysis of the results of operations for the three-month and six-month periods ended September 30, 2016 and 2015 should be
read in conjunction with our consolidated financial statements and notes thereto included in this Quarterly Report on Form 10-Q.
As used below, the abbreviations “Bbls” stands for barrels, “NGL” stands for natural gas liquids, “Mcf”
for thousand cubic feet and “Boe” for barrels of oil equivalent. Natural gas equivalents are determined using a ratio
of 6 Mcf of natural gas to 1 Bbl of crude oil or NGLs (“Natural Gas Liquids”) based on 42 gallons to 1 Bbl of crude
oil. The majority of the numbers presented below are rounded numbers and should be considered as approximate.

Three Months Ended September 30,
2016 vs. Three Months Ended September 30, 2015

We reported a
net loss for the three months ended September 30, 2016 of $50.8 million, or $7.74 per share of common stock. For the same
period a year ago, we reported a net loss of $1.0 million, or $0.66 per share of common stock. As discussed in more detail
below, our significant increase in net loss is primarily related to recognizing a $49.0 million impairment to oil and gas
properties due to a write-down of the assets acquired in our recent acquisition of working interests in certain oil and gas
properties in August 2016, due primarily to a difference between our stock price when the transaction was initially
contemplated and the transaction close date, as described in greater detail below. When not taking into effect the impairment
expense, our net loss increased by $0.9 million due to increased operating and other expenses of $1.5 million offset by $0.6
million in increased revenue when comparing the current period to the prior period.

27

The following table
sets forth the operating results and production data for the periods indicated:

Three Months Ended September 30,

Increase

% Increase

2016

2015

(Decrease)

(Decrease)

Sale Volumes:

Crude Oil (Bbls)

11,694

6,620

5,074

77

%

Natural Gas (Mcf)

62,973

—

62,973

100

%

NGL (Gallons)

506,975

—

506,975

100

%

Total (Boe)

34,260

6,620

27,640

418

%

Crude Oil (Bbls per day)

127

72

55

76

%

Natural Gas (Mcf per day)

684

—

684

100

%

NGL (Gallons per day)

5,511

—

5,511

100

%

Total (Boe per day)

372

72

300

417

%

Average Sale Price:

Crude Oil ($/Bbl)

$

42.92

$

43.80

$

(0.88

)

(2

%)

Natural Gas ($/Mcf)

2.68

—

2.68

100

%

NGL ($/Gallon)

0.44

—

0.44

100

%

Net Operating Revenues:

Crude Oil

$

501,891

$

289,974

$

211,917

73

%

Natural Gas

168,998

—

168,998

100

%

NGL

223,624

—

223,624

100

%

Total Revenues

$

894,513

$

289,974

$

604,539

208

%

Oil and Gas Revenues

Total production revenues
for the three months ended September 30, 2016 increased $0.6 million, or 208%, to $0.9 million from $0.3 million for the same period
a year ago due primarily to a favorable production volume variance as a result of our asset acquisition and our joint drilling
program with Lonestar Resources entered into in August 2016. In addition to increased crude oil sales, we recognized $0.4 million
in gas sales from the month of September 2016 alone. There was no material change in the price of crude oil sales when comparing
the current period to the prior period.

28

Operating and Other Expenses

The following table summarizes our production
costs and operating expenses for the periods indicated:

Three Months Ended September 30,

Increase

% Increase

2016

2015

(Decrease)

(Decrease)

Direct lease operating expense

$

292,777

$

128,201

$

164,576

128

%

Workovers expense

38,109

93,487

(55,378

)

(59

%)

Other

169,441

31,071

138,370

445

%

Lease Operating Expenses

$

500,327

$

252,759

$

247,568

98

%

Severance and Property Taxes

51,706

32,872

18,834

57

%

Depreciation, Depletion,

Amortization and Accretion

522,779

259,950

262,829

101

%

Impairment of Oil and Gas Properties

48,990,520

—

48,990,520

100

%

General and Administrative (G&A)

$

1,012,256

$

572,380

$

439,876

77

%

Share-Based Compensation

29,396

56,618

(27,222

)

(48

%)

Total G&A Expense

$

1,041,652

$

628,998

$

412,654

66

%

Interest Expense

587,398

120,764

466,364

387

%

Other Expense (Income), Net

5,408

(52,678

)

58,086

(110

%)

Lease Operating Expenses

There was an increase
in lease operating expense of approximately $0.25 million when comparing the current quarter to the prior year quarter. The increase
is primarily due to our asset acquisition of working interests in various properties in Texas and Oklahoma in August 2016.

Depreciation, Depletion, Amortization
and Accretion (DD&A)

DD&A increased
for the current quarter as compared to the prior year period by approximately $0.3 million primarily related to an increase in
production of 27,640 Boe compared to the previous period. As noted above, the production increase can be attributed to our asset
acquisition of working interests in various properties in Texas and Oklahoma in August 2016.

Impairment of Oil and Gas Properties

The Company
recorded an impairment of $49.0 million associated with oil and gas properties acquired during our recent acquisition in
August 2016. The impairment was a non-cash adjustment in the purchase price paid for the acquired assets, primarily due to an
increase in the trading price of our common stock from the date the acquisition transaction was initially contemplated
on, December 30, 2015, on which date the closing price was $1.65 per share, and the date the transaction closed,
August 25, 2016, on which date the closing price was $3.78 per share, which resulted in the value of stock consideration paid
to the Sellers increasing relative to the original agreed price for the acquisition of the assets.

General and Administrative (G&A)
Expenses and Share-Based Compensation

G&A
expenses increased by 77% for the current quarter as compared to the prior year’s quarter, as the Company incurred
additional G&A expenses primarily related to professional fees from our financing transactions. During this time, the
Company has focused on cost reductions to improve the efficiency of the daily operating activities within the Company. There
was also a 48% decrease in share-based compensation primarily due to a decrease in the awarding of employee stock
based options and compensation.

29

Interest Expense

Interest expense for
the three months ended September 30, 2016 increased by approximately $0.5 million when compared to the three-month period ended
September 30, 2015, primarily due to a $0.2 million interest payment on the recently acquired IBC Loan and the $0.3 million amortization
of various loan discounts.

Other Expense (Income), Net

Other expense (Income),
net, for the three months ended September 30, 2016 increased by approximately $58,000 when compared to the three-month period ending
September 30, 2015 due to increased conversion fees and a change in the fair value of our derivative liability.

Six Months Ended September 30, 2016
vs. Six Months Ended September 30, 2015

We reported a
net loss for the six months ended September 30, 2016 of approximately $52.2 million, or $12.61 per share of common stock. For
the same period a year ago, we reported a net loss of approximately $2.0 million, or $1.39 per share of common stock.

As discussed in
more detail below, our significant net loss increase is primarily related to our recognizing a $49.0 million impairment to
oil and gas properties due to a write-down of the assets acquired in our recent acquisition of working interest in certain
oil and gas properties in August 2016, due primarily to a difference between our stock price when the transaction
was initially contemplated and when the transaction actually closed, as described in greater detail below. When not taking
into effect the impairment expense, our net loss increased by $1.2 million due to increased operating and other expenses of
$1.6 million, offset by $0.4 million in increased revenue when comparing the current period to the prior period.

The following table sets forth the
operating results and production data for the periods indicated:

Six Months Ended September 30,

Increase

% Increase

2016

2015

(Decrease)

(Decrease)

Sale Volumes:

Crude Oil (Bbls)

15,311

13,664

1,647

12

%

Natural Gas (Mcf)

62,973

—

62,973

100

%

NGL (Gallons)

506,975

—

506,975

100

%

Total (Boe)

37,877

13,664

24,213

177

%

Crude Oil (Bbls per day)

84

75

9

12

%

Natural Gas (Mcf per day)

344

—

344

100

%

NGL (Gallons per day)

2,770

—

2,770

100

%

Total (Boe per day)

207

75

132

176

%

Average Sale Price:

Crude Oil ($/Bbl)

$

42.79

$

50.04

$

(7.25

)

(14

%)

Natural Gas ($/Mcf)

2.68

—

2.68

100

%

NGL ($/Gallon)

0.44

—

0.44

100

%

Net Operating Revenues:

Crude Oil

$

655,135

$

683,701

$

(28,566

)

(4

%)

Natural Gas

168,998

—

168,998

(4

%)

NGL

223,624

—

223,624

100

%

Total Revenues

$

1,047,757

$

683,701

$

364,056

53

%

30

Oil and Gas Revenues

Total production revenues
for the six months ended September 30, 2016 increased $0.4 million, or 53%, to $1.0 million from $0.7 million for the same period
a year ago due primarily to a favorable production volume variance of approximately $0.5 million offset with an unfavorable crude
oil price variance of approximately $0.1 million. The production increase can be attributed primarily to our asset acquisition
and joint drilling program with Lonestar Resources which began in August 2016. Although oil production was down from the prior
period, the additional natural gas sales for the month of September 2016 alone provided the $0.4 million increase in production
revenue when comparing the current year’s period to the prior year’s period.

Operating and Other Expenses

The following table summarizes our production
costs and operating expenses for the periods indicated:

Six Months Ended September 30,

Increase

% Increase

2016

2015

(Decrease)

(Decrease)

Direct lease operating expense

$

439,030

$

239,796

$

199,234

83

%

Workovers expense

137,870

113,670

24,200

21

%

Other

199,624

62,017

137,607

222

%

Lease Operating Expenses

$

776,524

$

415,483

$

361,041

87

%

Severance and Property Taxes

75,568

70,495

5,073

7

%

Depreciation, Depletion,

Amortization and Accretion

659,682

535,038

124,644

23

%

Impairment of Oil and Gas Properties

48,990,520

—

48,990,520

100

%

General and Administrative (G&A)

$

1,641,327

$

1,081,417

$

559,910

52

%

Share-Based Compensation

58,095

97,402

(39,307

)

(40

%)

Total G&A Expense

$

1,699,422

$

1,178,819

$

520,603

44

%

Interest Expense

926,889

506,219

420,670

83

%

Other Expense (Income), Net

95,781

(37,789

)

133,570

(353

%)

Lease Operating Expenses

In total, the overall
lease operating expenses increased approximately $0.4 million or 87% for the current period as compared to the prior year’s
period. The increase is primarily due to our asset acquisition of working interest in various properties in Texas and Oklahoma
in August 2016.

Depreciation, Depletion, Amortization
and Accretion (DD&A)

Although our production
increased by 24,213 Boe due to our asset acquisition of working interest in various properties in Texas and Oklahoma in August
2016, when comparing the current period to the prior period, the increase in production was primarily for the month of September
2016; therefore, there was only a corresponding $0.1 million increase in DD&A.

31

Impairment of Oil and Gas Properties

The Company
recorded an impairment of $49.0 million associated with oil and gas properties acquired during our recent acquisition in
August 2016. The impairment was due to a write down associated with the difference in the assets acquired compared to the
consideration provided by the Company. The impairment was a non-cash adjustment in the purchase price paid for the acquired
assets, primarily due to an increase in the trading price of our common stock from the date the acquisition transaction was
initially contemplated on, December 30, 2015, on which date the closing price was $1.65 per share, and the date the
transaction closed, August 25, 2016, on which date the closing price was $3.78 per share, which resulted in the value of
stock consideration paid to the Sellers increasing relative to the original agreed price for the acquisition of the
assets.

General and Administrative (G&A)
Expenses and Share-Based Compensation

G&A expenses
increased during the current six month period when compared to the prior six month period by 52%. The Company incurred
additional G&A expenses primarily related to professional fees from our financing transactions. During this time,
the Company has also focused on cost reductions to improve the efficiency of the daily operating activities within the
Company. There was also a 40% decrease in share-based compensation when comparing the current six month period to the prior
six month period due to a decrease in the awarding of employee stock based options and compensation.

Interest Expense

Interest expense for
the six months ended September 30, 2016 increased by approximately $0.4 million when compared to the prior period primarily due
to the amortization of various loan discounts for outstanding and recently retired payables.

Other Expense (Income), Net

Other Expense (Income),
net, for the six months ended September 30, 2015 increased by approximately $0.1 million when compared to the prior years’
six-month period, due to increased conversion and filing fees and an adjustment to a warrant liability.

LIQUIDITY AND CAPITAL RESOURCES

The accompanying consolidated
financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America
on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course
of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and
classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Our primary sources
of cash for the six months ended September 30, 2016 were from funds generated from the sale of preferred stock, the sale of
natural gas and crude oil production and funds borrowed under funding agreements. These cash flows were primarily used to fund
our capital expenditures and operations and to repay indebtedness. See below for an additional discussion and analysis of cash
flow.

Working Capital

At September
30, 2016, the Company’s total current liabilities of $15.9 million exceeded its total current assets of $6.0
million, resulting in a working capital deficit of $9.9 million, while at March 31, 2016, the Company’s total
current liabilities of $11.1 million exceeded its total current assets of $0.6 million, resulting in a working capital
deficit of $10.5 million. The $0.6 million decrease in the working capital deficit is primarily related to $5.4 million in
cash and restricted cash received together with additional receivables from our recent asset acquisition offset by $4.8
million in additional borrowings and payables.

Net cash used in
operating activities was $2.7 million for the six months ended September 30, 2016 as compared to $0.7 million for the same
period a year ago. The increase in net cash used in operating activities of $2.0 million was primarily related to $1.0
million in receivables owed to us from our oil and gas properties as well as $0.6 million in additional
amortization of discounts recognized at the settlement of various funding arrangements.

Net cash used
in investing activities was $6.0 million for the six months ended September 30, 2016 as compared to net cash provided by
investing activities of $0.3 million for the same period a year ago. The $6.3 million increase in net cash used in investing
activities was primarily due to our acquisition of working interest in certain oil and gas properties during the
current period when compared to the prior period.

Net cash provided
by financing activities for the six months ended September 30, 2016 increased $8.8 million primarily due to the loan we
issued related to our acquisition of working interest in certain oil and gas properties during the current period
when compared to the prior period.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK.

Market risk is the
risk of loss arising from adverse changes in market rates and prices. We are exposed to risks related to increases in the prices
of fuel and raw materials consumed in exploration, development and production. We do not engage in commodity price hedging activities.

ITEM 4. CONTROLS AND PROCEDURES.

Disclosure Controls and Procedures.

Disclosure controls
and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange
Act”)) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange
Act is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules
and forms and that such information is accumulated and communicated to management, including the Chief Executive Officer and Chief
Accounting Officer (our principal executive officer and principal financial officer), to allow timely decisions regarding required
disclosures. The Company’s management, including the Chief Executive Officer and Chief Accounting Officer (our principal
executive officer and principal financial officer), evaluated the effectiveness of the Company’s disclosure controls and
procedures as of the end of the period covered by this report. Based upon that evaluation, the Company’s Chief Executive
Officer and Principal Accounting Officer (our principal executive officer and principal financial officer) concluded that the Company’s
disclosure controls and procedures were effective as of September 30, 2016.

Changes in Internal Control Over Financial
Reporting

There have not been
any changes in our internal control over financial reporting during the three months ended September 30, 2016 that have materially
affected, or are reasonably likely to materially affect, our internal control over financial reporting.

33

PART II - OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS.

Lucas is periodically
named in legal actions arising from normal business activities. Lucas evaluates the merits of these actions and, if it determines
that an unfavorable outcome is probable and can be reasonably estimated, Lucas will establish the necessary reserves. We are not
currently involved in legal proceedings that could reasonably be expected to have a material adverse effect on our business, prospects,
financial condition or results of operations. We may become involved in material legal proceedings in the future.

ITEM 1A. RISK FACTORS.

There have been no
material changes from the risk factors previously disclosed in the Company’s Annual Report on Form 10-K for the year ended
March 31, 2016, filed with the Commission on July 13, 2016, except as provided below, and investors should review the risks provided
below and in the Form 10-K prior to making an investment in the Company.

We
are currently not in compliance with NYSE MKT continued listing standards and if we are unable to regain compliance, our common
stock may be delisted from the NYSE MKT equities market, which would likely cause the liquidity and market price of our common
stock to decline.

Our
common stock currently is listed on the NYSE MKT (the “Exchange”). The Exchange will consider suspending dealings in,
or delisting, securities of an issuer that does not meet its continued listing standards.

On
July 21, 2016, we received notice from the Exchange that we were not in compliance with certain of the Exchange’s continued
listing standards as set forth in Part 10 of the NYSE MKT Company Guide (the “Company Guide”). Specifically, we were
not in compliance with Sections 1003(a)(ii) and (iii) of the Company Guide because we did not have stockholders’ equity over
$4 million (required if an Exchange listed company has had losses from continuing operations and/or net losses in three of its
last four fiscal years, as we did) or over $6 million (required if an Exchange listed company has had losses from continuing operations
and/or net losses in its five most recent fiscal years, as we did), as of March 31, 2016 (we reported stockholders’ equity
of only $2.4 million as of March 31, 2016 and had reported losses from operations in our five most recent fiscal years).

We
subsequently submitted a plan of compliance (the “Plan”) addressing how we intended to regain compliance with Sections
1003(a)(ii) and (iii) of the Company Guide. On October 4, 2016, we were notified by the Exchange that it accepted our Plan to regain
compliance with Sections 1003(a)(ii) and (iii) of the Company Guide by January 21, 2018, subject to periodic review by the Exchange
for compliance with the initiatives set forth in the Plan.

If
we are not in compliance with the continued listing standards by January 21, 2018, or if we do not make progress consistent with
the Plan during the plan period, the Exchange staff may initiate delisting proceedings as appropriate. There can be no assurance
that we will be able to achieve compliance with the Exchange’s continued listing standards within the required time frame.

Our
business has been and may continue to be affected by worldwide macroeconomic factors, which include uncertainties in the credit
and capital markets. External factors that affect our stock price, such as liquidity requirements of our investors, as well as
our performance, could impact our market capitalization, revenue and operating results, which, in turn, affect our ability to comply
with the Exchange’s listing standards. The Exchange has the ability to suspend trading in our common stock or remove our
common stock from listing on the Exchange if in the opinion of the Exchange: (a) the financial condition and/or operating results
of the Company appear to be unsatisfactory; or (b) it appears that the extent of public distribution or the aggregate market value
of our common stock has become so reduced as to make further dealings on the Exchange inadvisable; or (c) we have sold or otherwise
disposed of our principal operating assets, or have ceased to be an operating company; or (d) we have failed to comply with our
listing agreements with the Exchange (including those described above); or (e) any other event shall occur or any condition shall
exist which makes further dealings on the Exchange unwarranted.

34

If
we are unable to satisfy the Exchange’s criteria for continued listing and are unable to regain compliance during any applicable
cure periods, our common stock would be subject to delisting. A delisting of our common stock could negatively impact us by, among
other things, reducing the liquidity and market price of our common stock and reducing the number of investors willing to hold
or acquire our common stock, which could negatively impact our ability to raise equity financing. In addition, delisting from the
Exchange might negatively impact our reputation and, as a consequence, our business. Additionally, if we were delisted from the
Exchange and are not able to list our common stock on another national exchange we will no longer be eligible to use Form S-3 registration
statements and will instead be required to file a Form S-1 registration statement for any primary or secondary offerings of our
common stock, which would delay our ability to raise funds in the future, may limit the type of offerings of common stock we could
undertake, and would increase the expenses of any offering, as, among other things, registration statements on Form S-1 are subject
to SEC review and comments whereas take downs pursuant to a previously filed Form S-3 are not.

The full amount
of premiums, interest and dividends through the maturity date of each applicable security is due upon the repayment/redemption
(where applicable), exercise or conversion, as applicable, of the Second Warrant, Debenture, and Series C Preferred Stock.

On April 6, 2016, the
Company sold the Investor the First Warrant and a redeemable convertible subordinated debenture, with a face amount of $530,000
(the Debenture”). On September 2, 2016, the Company issued and sold 53 shares of its Series C redeemable convertible preferred
stock (the “Series C Stock”) and a warrant (the “Second Warrant”) to purchase 1,111,112 shares of its common
stock, to the Investor and the remaining 474 shares of Series C Preferred Stock will be sold and issued for $4.5 million, immediately
after there was an effective registration statement covering the shares of common stock issuable upon conversion of the Series
C Preferred Stock, subject to the approval of the Investor and the Company. Such securities provide that all applicable premiums
(due under the terms of the Second Warrant), interest (due under the terms of the Debenture), and dividends (due under the terms
of the Series C Preferred Stock), which each initially accrued in the amount of 6% per annum and which increase or decrease subject
to the terms of the applicable securities, based on among other things, the trading price of the Company’s common stock,
up to a maximum of 24.95% per annum, are due upon exercise or conversion, or repayment/redemption (where applicable) thereof, for
the full seven year term of such securities.

Because a trigger event
occurred under the Debenture and Second Warrant on June 30, 2016, the applicable interest rate and premiums due thereunder, as
applicable, are currently 17% per annum, provided that such interest rate and premiums continue to be adjustable pursuant to the
terms of such securities, up to a maximum of 24.95% per annum. In the event a trigger event occurs under the Series C Preferred
Stock (as described therein), the dividend rate of such security may increase substantially. The requirement that we pay all premiums,
interest and dividends through maturity and the adjustable nature of such premium, interest and dividend rates, may force us to
issue the investor significant additional shares of common stock (similar to the currently disclosed required issuance to the Investor
under the First Warrant), which may cause significant dilution to existing stockholders. The requirement that we pay all premiums,
interest and dividends through maturity may make it too costly for us to repay or redeem, as applicable, the Investor’s securities,
prior to exercise/conversion thereof, as applicable.

The number of
shares of common stock issuable in consideration for premiums, interest and dividends through maturity on the First Warrant, Second
Warrant, Debenture and Series C Preferred Stock, continue to be adjustable after the exercise or conversion of such securities.

Pursuant to the terms
of the First Warrant, Second Warrant, Debenture and Series C Stock, the conversion rate of such securities in connection with the
premiums, interest and dividends due on such securities through maturity (each 7 years, regardless of when converted or exercised),
continues to be adjustable after the issuance of such securities. Specifically, such securities remain adjustable, based on a discount
to the average of the five lowest daily volume weighted average prices during a measuring period of thirty days (sixty days in
the event a trigger event has occurred) after the applicable number of shares stated in the initial exercise/conversion
notice (or any update thereto) have actually been received into the Investor’s designated brokerage account in electronic
form and fully cleared for trading (subject to certain extensions described in the applicable securities). Because the Investor
is limited to holding not more than 4.99% of the Company’s common stock upon exercise/conversion of any security, the Investor
will not receive all of the shares due upon any exercise/conversion, until it has sold shares and been issued additional shares
and as such, the beginning date for the applicable 30 or 60 day period after issuance/conversion is impossible to determine and
may be a significant additional number of days after the initial exercise/conversion by the Investor. Because a trigger event occurred
under the Debenture, First Warrant and Second Warrant on June 30, 2016, the applicable measuring period for such securities ends
60 days from the date that the Investor has received the last number of shares due upon the initial exercise/conversion of such
securities. Additionally, because the Investor is in control of when it sells shares, it can delay the start of any applicable
post-issuance measuring period in its sole discretion.

35

In the event of a decrease
in the Company’s stock price during the applicable measuring period, the conversion rate of the premiums, interest and dividends
due on such applicable securities will adjust downward and the Investor will be due additional shares of common stock, which issuances
may cause further significant dilution to existing shareholders and the sale of such shares may cause the value of the Company’s
common stock to decline in value. Furthermore, it is likely that the sale by the Investor of the shares of common stock which the
Investor receives in connection with any exercise/conversion, including, but not limited to the shares of common stock which the
Investor received in connection with the exercise of the First Warrant, during the applicable measuring period, may cause the value
of the Company’s common stock to decline in value and the conversion rate to decrease which will result in the Investor being
due additional shares of common stock at the end of the measuring period, the sale of which may trigger additional decreases in
the value of the Company’s common stock upon further public sales by the Investor. If this were to occur, the
Investor would be entitled to receive an increasing number of shares, upon exercise/conversion of the remaining securities, which
could then be sold, triggering further price declines and exercises/conversions for even larger numbers of shares, which would
cause additional dilution to our existing stockholders and would likely cause the value of our common stock to decline.

The
issuance of common stock upon exercise/conversion of the Second Warrant, Debenture and Series C Preferred Stock, and the issuance
of additional shares of common stock under the First Warrant, will cause immediate and substantial dilution.

The
issuance of common stock upon exercise/conversion of the Second Warrant, Debenture and Series C Preferred Stock, and the issuance
of additional shares of common stock under the terms of the First Warrant, will result in immediate and substantial dilution to
the interests of other stockholders. Although the Investor may not receive shares of common stock exceeding 4.99% of our outstanding
shares of common stock immediately after affecting such exercise/conversion, this restriction does not prevent the Investor from
receiving shares up to the 4.99% limit, selling those shares, and then receiving the rest of the shares it is due, in one of more
tranches, while still staying below the 4.99% limit. If the Investor chooses to do this, it will cause substantial dilution to
the then holders of our common stock.

The
Investor, subject to applicable contractual restrictions, and/or a third party, may sell short our common stock, which could have
a depressive effect on the price of our common stock.

As
described above, the conversion price for the value of premiums, interest and dividends due in connection with the First Warrant,
Second Warrant, Debenture and Series C Preferred Stock, is based on a discount to the trading price of the Company’s common
stock. The Investor is prohibited from selling the Company’s stock short, as long as no trigger event occurs under the Debenture
and Series C Preferred Stock. Because a trigger event occurred under the Debenture on June 30, 2016, in the event a trigger event
occurs under the Series C Preferred Stock, the Investor will not be prohibited from selling the Company’s common stock short.
Additionally, nothing prohibits a third party from selling the Company’s common stock short based on their belief that due
to the dilution caused by the conversions/exercises of the securities held by the Investor, that the trading price of the Company’s
common stock will decline in value. The significant downward pressure on the price of our common stock as the Investor sells material
amounts of our common stock could encourage investors to short sell our common stock. This could place further downward pressure
on the price of our common stock and in turn result in the Investor receiving additional shares of common stock upon exercise/conversion
of its securities, and adjustments thereof.

36

The Company is
limited in its ability to undertake subsequent financings.

Until 60 days after
the registration statement registering the resale of the shares underlying the Second Warrant and initial 53 shares of Series C
redeemable convertible preferred stock is declared effective by the Securities and Exchange Commission, which effectiveness date
was October 28, 2016 (the “Effective Date”), the Company is prohibited from issuing or entering into an agreement to
issue any shares of common stock, subject to certain limited exceptions. Additionally, until at least six months after the entire
Debenture and Second Warrant have been converted, redeemed or exercised, the Company has agreed to not enter into any equity or
convertible financing pursuant to which securities issued at a discount or with a variable conversion price are issued, subject
to certain exceptions. These restrictions may make it more costly for us to raise funding in the future or may limit our ability
to raise funding, which could force us to curtail our business plan or prohibit us from taking advantage of attractive investment,
acquisition or drilling activities, all of which could have a negative effect on the value of our common stock and our near-term
or long-term prospects.

ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

In connection with
the August 25, 2016 closing of the December 30, 2015 Asset Purchase Agreement, we issued 552,000 shares of Series B Preferred Stock
and 13,009,664 shares of restricted common stock to certain of the Sellers. If fully converted, without taking into account the
accrual and conversion of any dividends thereon, which are also convertible into shares of common stock, the 552,000 shares of
Series B Preferred Stock are convertible into 3,941,280 shares of common stock.

Also on August 25,
2016, we issued International Bank of Commerce 390,290 restricted shares of common stock as additional consideration for agreeing
to the terms of the Loan.

We claim an exemption
from registration for the issuances described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation D of the Securities
Act, since the foregoing issuances did not involve a public offering and the recipients were “accredited investors”,
the recipients acquired the securities for investment only and not with a view towards, or for resale in connection with, the public
sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives. No underwriters
or agents were involved in the foregoing issuances and we paid no underwriting discounts or commissions. The securities sold are
subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating that such
securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant to
an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or sold
in the United States absent registration or an exemption from registration under the Securities Act and any applicable state securities
laws.

On August 29, 2016,
Rockwell Capital Partners, Inc., converted $112,637 of the principal and interest due under a Convertible Promissory Note into
shares of our common stock at a conversion price of $1.50 per share, and was issued an aggregate of 106,520 shares. We claim an
exemption from registration provided by Section 3(a)(9) of the Securities Act, as the security was exchanged by us with our existing
security holder in a transaction where no commission or other remuneration was paid or given directly or indirectly for soliciting
such exchange.

On August 30, 2016,
Rockwell Capital Partners, Inc., converted $305,003 of the principal and interest due under certain Convertible Promissory Notes
into shares of our common stock at a conversion price of $1.50 per share, and was issued an aggregate of 203,335 shares. We claim
an exemption from registration provided by Section 3(a)(9) of the Securities Act, as the security was exchanged by us with our
existing security holder in a transaction where no commission or other remuneration was paid or given directly or indirectly for
soliciting such exchange.

On March 28, 2016,
we borrowed $250,000 from Alan Dreeben, a member of the Board of Directors. As additional consideration for Mr. Dreeben agreeing
to make the loan, we agreed to issue Mr. Dreeben 15,000 restricted shares of common stock, which were issued in September 2016.
We claim an exemption from registration for the issuance described above pursuant to Section 4(a)(2) and/or Rule 506 of Regulation
D of the Securities Act, since the foregoing issuance did not involve a public offering and the recipient was an “accredited
investor”, the recipient acquired the securities for investment only and not with a view towards, or for resale in connection
with, the public sale or distribution thereof. The securities were offered without any general solicitation by us or our representatives.
No underwriters or agents were involved in the foregoing issuance and we paid no underwriting discounts or commissions. The securities
sold are subject to transfer restrictions, and the certificates evidencing the securities contain an appropriate legend stating
that such securities have not been registered under the Securities Act and may not be offered or sold absent registration or pursuant
to an exemption therefrom. The securities were not registered under the Securities Act and such securities may not be offered or
sold in the United States absent registration or an exemption from registration under the Securities Act and any applicable state
securities laws.

37

On September 2, 2016,
we issued and sold 53 shares of our Series C redeemable convertible preferred stock and a warrant to purchase 1,111,112 shares
of our common stock in an initial closing pursuant to the stock purchase agreement that we had entered into with the Investor on
April 6, 2016. The terms of the Series C Stock, the Second Warrant and the Stock Purchase Agreement were previously reported in
the Company’s Current Report on Form 8-K filed with the Securities and Exchange Commission on April 7, 2016. The sale and
issuance of the securities described above was determined to be exempt from registration under the Securities Act in reliance on
Sections 3(a)(9) and 4(a)(2) of the Securities Act, Rule 506 of Regulation D promulgated thereunder and Regulation S promulgated
thereunder, as transactions by an issuer not involving a public offering. The Investor has represented that it is an accredited
investor, as that term is defined in Regulation D, it is not a U.S. Person, and it is acquiring the securities for its own account.
The Company received gross proceeds of $500,000 from the sale and issuance of the 53 shares of Series C Stock and, as previously
disclosed, paid placement agent fees of $47,500 for services rendered in connection with the initial closing.

On September 28, 2016,
Texas Capital & Assets LLC, an assignee of Silver Star, converted $207,566 of the principal and interest due under a Convertible
Promissory Note into shares of our common stock at a conversion price of $1.50 per share, and was issued an aggregate of 138,377
shares, certain rights to which were transferred to an assignee. We claim an exemption from registration provided by Section 3(a)(9)
of the Securities Act, as the security was exchanged by us with our existing security holder in a transaction where no commission
or other remuneration was paid or given directly or indirectly for soliciting such exchange.

On October 4, 2016,
HFT Enterprises LLC, converted $468,000 of the principal and interest due under certain outstanding Convertible Promissory Notes
into shares of our common stock at a conversion price of $1.50 per share, and was issued an aggregate of 309,866 shares. We claim
an exemption from registration provided by Section 3(a)(9) of the Securities Act, as the security was exchanged by us with our
existing security holder in a transaction where no commission or other remuneration was paid or given directly or indirectly for
soliciting such exchange.

On October 7, 2016,
the Investor exercised the First Warrant in full and was due 1,384,616 shares of common stock upon exercise thereof and an additional
2,252,735 shares of common stock in consideration for the conversion premium due thereon. A total of 810,000 shares were issued
to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in
the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company
received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services
rendered in connection with the First Warrant.

On October 19, 2016,
the Investor notified the Company of an adjustment to the calculation of the conversion premium triggered by a reduction in the
trading price of the Company’s common stock, which resulted in an additional 1,630,751 shares of common stock (5,558,102
shares in aggregate, including shares previously issued) being due in connection with such exercise and the payment of the conversion
premium. Also on October 19, 2016, we issued the Investor an additional 870,000 shares of common stock in connection with the October
7, 2016 exercise of the First Warrant.

On October 27, 2016,
the Investor notified the Company of another adjustment to the calculation of the conversion premium triggered by a further reduction
in the trading price of the Company’s common stock, which resulted in an additional 826,981 shares of common stock (6,385,083
shares in aggregate, including shares previously issued) being due in connection with such exercise and the payment of the conversion
premium. Also on October 27, 2016, we issued the Investor an additional 920,000 shares of common stock in connection with the October
7, 2016 exercise of the First Warrant. Since October 27, 2016, the trading price of our common stock has further declined, triggering
a further reduction in the conversion premium and an increase in the number of shares due to the Investor in connection with the
conversion of the conversion premium.

38

The remainder of the
shares of common stock due to the Investor are continued to be held in abeyance until such time as it would not result in the Investor
exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock).

The sales and issuances
of the securities described above have been determined to be exempt from registration under the Securities Act in reliance on Sections
3(a)(9) and 4(a)(2) of the Securities Act, Rule 506 of Regulation D promulgated thereunder and Regulation S promulgated thereunder,
as transactions by an issuer not involving a public offering. The warrant holder has represented that it is an accredited investor,
as that term is defined in Regulation D, it is not a U.S. Person, and that it is acquiring the securities for its own account.

Use of Proceeds
from Sale of Registered Securities

None.

Issuer
Purchases of Equity Securities

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES.

Not Applicable.

ITEM 5. OTHER INFORMATION.

None.

39

ITEM 6. EXHIBITS.

See the Exhibit Index
following the signature page to this Quarterly Report on Form 10-Q for a list of exhibits filed or furnished with this report,
which Exhibit Index is incorporated herein by reference.

SIGNATURES

Pursuant to the requirements
of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized.

LUCAS ENERGY, INC.

(Registrant)

/s/ Anthony C. Schnur

Anthony C. Schnur

(Principal Executive Officer)

Date: November 14, 2016

/s/ Paul A. Pinkston

Paul A. Pinkston

Chief Accounting Officer

(Principal Financial/Accounting Officer)

Date: November 14, 2016

40

EXHIBIT
INDEX

Exhibit No.

Description

2.1

Asset Purchase Agreement by and between Lucas Energy, Inc., as purchaser, Segundo Resources, LLC, as seller representative to the various sellers named therein, and the sellers named therein dated December 30, 2015+ (incorporated by reference to Exhibit 2.1 of the Form 8-K filed by the Company with the SEC on December 31, 2015)

2.2

First Amendment to Asset Purchase Agreement by and between Lucas Energy, Inc., as purchaser, Segundo Resources, LLC, as seller representative to the various sellers named therein, and the sellers named therein dated April 20, 2016 and effective April 1, 2016 (Filed as Exhibit 2.2 to the Company’s Report on Form 8-K, filed with the Commission on April 25, 2016, and incorporated herein by reference)(File No. 001-32508)

2.3

Second Amendment to Asset Purchase Agreement by and between Lucas Energy, Inc., as purchaser, Segundo Resources, LLC, as seller representative to the various sellers named therein, and the sellers named therein dated August 25, 2016 (Filed as Exhibit 2.1 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

3.1

Amended and Restated Certificate of Designation of Lucas Energy, Inc. Establishing the Designation, Preferences, Limitations and Relative Rights of Its Series B Redeemable Convertible Preferred Stock as filed with the Secretary of State of Nevada on August 25, 2016 (Filed as Exhibit 3.1 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

3.2

Certificate of Designations of Preferences, Powers, Rights and Limitations of Series C Redeemable Convertible Preferred Stock as filed with the Secretary of State of Nevada on August 25, 2016 (Filed as Exhibit 3.2 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

3.3

Amended and Restated Bylaws (effective March 29, 2016) (Filed as Exhibit 3.1 to the Company’s Report on Form 8-K, filed with the Commission on April 1, 2016, and incorporated herein by reference)(File No. 001-32508)

4.1

Form of Common Stock Purchase Warrant provided by Lucas Energy, Inc. to Target Alliance London Limited (Filed as Exhibit 10.2 to the Company’s Report on Form 8-K, filed with the Commission on April 15, 2016, and incorporated herein by reference)(File No. 001-32508)

4.2

Form of Common Stock Purchase Warrant (attached as Exhibit B to the Convertible Promissory Note Purchase Agreement incorporated by reference herewith as Exhibit 10.21)

4.3

Form of Redeemable Convertible Subordinated Debenture (Incorporated by reference to Exhibit 4.1 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2016)(File No. 001-32508)

4.4

Form of Common Stock Purchase First Warrant (Incorporated by reference to Exhibit 4.2 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2016)(File No. 001-32508)

4.5

Form of Common Stock Purchase Second Warrant (Incorporated by reference to Exhibit 4.3 to the Company’s Current Report on Form 8-K filed with the SEC on April 7, 2016)(File No. 001-32508)

4.6

Common Stock Purchase Second Warrant (Filed as Exhibit 4.1 to the Company’s Current Report on Form 8-K, filed with the Commission on September 8, 2016, and incorporated herein by reference)(File No. 001-32508)

10.1

Letter Loan Agreement (Louise H. Rogers)(August 13, 2013) (Filed as Exhibit 10.1 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2013, filed with the Commission on August 14, 2013, and incorporated herein by reference)(File No. 001-32508)

41

10.2

Amended Letter Loan Agreement (Louise H. Rogers)(April 29, 2014) (Filed as Exhibit 10.1 to our Current Report on Form 8-K, dated April 29, 2014, and filed with the Commission on May 1, 2014 and incorporated herein by reference)(File No. 001-32508)

10.3

Promissory Note ($7.5 million)(Louise H. Rogers)(August 13, 2013) (Filed as Exhibit 10.2 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2013, filed with the Commission on August 14, 2013, and incorporated herein by reference)(File No. 001-32508)

10.4

Amended and Restated Promissory Note ($7,308,817.32)(Louise H. Rogers)(April 29, 2014) (Filed as Exhibit 10.2 to our Current Report on Form 8-K, dated April 29, 2014, and filed with the Commission on May 1, 2014 and incorporated herein by reference)(File No. 001-32508)

10.5

Security Agreement (Louise H. Rogers)(August 13, 2013) (Filed as Exhibit 10.3 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2013, filed with the Commission on August 14, 2013, and incorporated herein by reference)(File No. 001-32508)

10.6

Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement, and Fixture Filing (Louise H. Rogers)(August 13, 2013) (Filed as Exhibit 10.4 to the Company’s Quarterly Report on Form 10-Q for the period ended June 30, 2013, filed with the Commission on August 14, 2013, and incorporated herein by reference)(File No. 001-32508)

10.7

Second Amended Letter Loan Agreement (Louise H. Rogers)(November 13, 2014) (Incorporated by reference to Exhibit 10.10 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 17, 2015)(File No. 001-32508)

10.8

Second Amended and Restated Promissory Note ($7,058,964.65)(Louise H. Rogers)(November 13, 2014) (Incorporated by reference to Exhibit 10.11 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on February 17, 2015)(File No. 001-32508)

10.9

Letter Agreement between Lucas Energy, Inc. and Louise H. Rogers dated February 23, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 24, 2015)(File No. 001-32508)

10.10

Amendment dated August 12, 2015, to the Second Amended Letter Loan Agreement and the Second Amended Promissory Note, both dated November 13, 2014, by and between Lucas Energy, Inc. and Louise H. Rogers (Incorporated by reference to Exhibit 10.17 to the Company’s Quarterly Report on Form 10-Q filed with the SEC on August 14, 2015)(File No. 001-32508)

10.11

Non-Revolving Line of Credit dated August 30, 2015 and effective August 28, 2015, by and between Lucas Energy, Inc. and Silver Star Oil Company (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2015)(File No. 001-32508)

10.12

Amendment Dated August 28, 2015 to the Second Amended Letter Loan Agreement and the Second Amended Promissory Note, both Dated November 13, 2014 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on September 1, 2015)(File No. 001-32508)

10.13

$200,000 Convertible Promissory Note (Note #3) issued to Silver Star Oil Company dated November 25, 2015, and effective November 23, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on November 25, 2015)(File No. 001-32508)

10.14

Amendment Dated December 14, 2015, to the Second Amended Letter Loan Agreement and the Second Amended Promissory Note, both dated November 13, 2014, by and between Lucas Energy, Inc. and Louise H. Rogers (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2015)(File No. 001-32508)

42

10.15

Assignment and Bill of Sale dated December 2015, by and between Lucas Energy, Inc. and CATI Operating LLC (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2015)(File No. 001-32508)

10.16

Assignment, Novation, and Assumption Agreement dated December 16, 2015, by and between Lucas Energy, Inc., CATI Operating LLC and Louise H. Rogers (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on December 18, 2015)(File No. 001-32508)

10.17

$200,000 Convertible Promissory Note (Note #4) issued to Silver Star Oil Company dated January 4, 2016, and effective December 31, 2015 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on January 5, 2016)(File No. 001-32508)

10.18

$200,000 Convertible Promissory Note (Note #5) issued to Silver Star Oil Company dated February 10, 2016 and effective February 8, 2016 (Incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K filed with the SEC on February 12, 2016)(File No. 001-32508)

10.19

First Amendment to Non-Revolving Line of Credit effective February 1, 2016 (Incorporated by reference to Exhibit 10.3 to the Company’s Current Report on Form 8-K filed with the SEC on February 12, 2016)(File No. 001-32508)

10.20

February 2, 2016 Letter Agreement Regarding Non-Revolving Line of Credit Agreement and Convertible Notes between Lucas Energy, Inc. and Silver Star Oil Company (Incorporated by reference to Exhibit 10.2 to the Company’s Current Report on Form 8-K filed with the SEC on February 12, 2016)(File No. 001-32508)

10.21

Convertible Promissory Note Purchase Agreement dated March 29, 2016, to be effective March 11, 2016, by and between Lucas Energy, Inc. and HFT Enterprises, LLC (Filed as Exhibit 10.1 to the Company’s Report on Form 8-K, filed with the Commission on April 1, 2016, and incorporated herein by reference)(File No. 001-32508)

10.22

Form of Convertible Promissory Note (attached as Exhibit A to the Convertible Promissory Note Purchase Agreement incorporated by reference herewith as Exhibit 10.21)

10.23

Convertible Promissory Note ($300,000) dated March 29, 2016, to be effective March 11, 2016, representing money borrowed by Lucas Energy, Inc. from HFT Enterprises, LLC (Filed as Exhibit 10.4 to the Company’s Report on Form 8-K, filed with the Commission on April 1, 2016, and incorporated herein by reference)(File No. 001-32508)

10.24

Convertible Promissory Note ($150,000) dated March 29, 2016, to be effective March 25, 2016, representing money borrowed by Lucas Energy, Inc. from HFT Enterprises, LLC (Filed as Exhibit 10.5 to the Company’s Report on Form 8-K, filed with the Commission on April 1, 2016, and incorporated herein by reference)(File No. 001-32508)

10.25

Short Term Promissory Note ($275,000) by Lucas Energy, Inc. in favor of Alan Dreeben dated March 28, 2016 (Filed as Exhibit 10.6 to the Company’s Report on Form 8-K, filed with the Commission on April 1, 2016, and incorporated herein by reference)(File No. 001-32508)

10.26+

Lucas Energy, Inc.’s Amended and Restated 2014 Stock Incentive Plan (Filed as Exhibit 10.7 to the Company’s Report on Form 8-K, filed with the Commission on April 1, 2016, and incorporated herein by reference)(File No. 001-32508)

10.27

Form of Debenture Securities Purchase Agreement (Filed as Exhibit 10.1 to the Company’s Report on Form 8-K, filed with the Commission on April 7, 2016, and incorporated herein by reference)(File No. 001-32508)

43

10.28

Form of Preferred Stock Purchase Agreement (Filed as Exhibit 10.2 to the Company’s Report on Form 8-K, filed with the Commission on April 7, 2016, and incorporated herein by reference)(File No. 001-32508)

10.29

Assignment, Assumption and Amendment to Line of Credit and Notes Agreement, dated April 11, 2016, by and between Target Alliance London Limited; Silver Star Oil Company; and Lucas Energy, Inc. (Filed as Exhibit 10.2 to the Company’s Report on Form 8-K, filed with the Commission on April 15, 2016, and incorporated herein by reference)(File No. 001-32508)

10.30

Form of First Amendment to Stock Purchase Agreement (Filed as Exhibit 10.1 to the Company’s Report on Form 8-K, filed with the Commission on May 2, 2016, and incorporated herein by reference)(File No. 001-32508)

10.31

Amended and Restated Short Term Promissory Note between Lucas Energy, Inc., as borrower and Alan Dreeben as lender dated June 27, 2016 ($385,000) (Filed as Exhibit 10.50 to the Company’s Report on Form 10-K for the year ended March 31, 2016, filed with the Commission on July 13, 2016, and incorporated herein by reference)(File No. 001-32508)

10.32

$1 million Promissory Note dated August 15, 2016 and effective August 25, 2016, by CATI Operating, LLC in favor of Louise H. Rogers (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on August 25, 2016, and incorporated herein by reference)(File No. 001-32508)

10.33

Ownership Interest Pledge Agreement dated August 15, 2016 and effective August 25, 2016, by Lucas Energy, Inc. in favor of Louise H. Rogers (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on August 25, 2016, and incorporated herein by reference)(File No. 001-32508)

10.34

Loan Guaranty Agreement dated August 15, 2016 and effective August 25, 2016, by Lucas Energy, Inc. in favor of Louise H. Rogers (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Commission on August 25, 2016, and incorporated herein by reference)(File No. 001-32508)

10.35

Assignment of Overriding Royalty Interest dated August 15, 2016 and effective August 25, 2016, by CATI Operating, LLC in favor of Robertson Global Credit, LLC (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the Commission on August 25, 2016, and incorporated herein by reference)(File No. 001-32508)

10.36

Letter Agreement dated August 25, 2016, by and between Lucas Energy, Inc. and RAD2 Minerals, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

10.37

$1.5 million Promissory Note by Lucas Energy, Inc. in favor of RAD2 Minerals, Ltd., dated August 25, 2016 (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

10.38

Loan Agreement dated August 25, 2016, between Lucas Energy, Inc., as borrower, Richard N. Azar, II, Donnie B. Seay, Richard E. Menchaca, RAD2 Minerals, Ltd., DBS Investments, Ltd., and Saxum Energy, LLC, as guarantors, and International Bank of Commerce, as lender (Filed as Exhibit 10.3 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

10.39

Real Estate Lien Note dated August 25, 2016, by Lucas Energy, Inc., as borrower in favor of International Bank of Commerce, as lender (Filed as Exhibit 10.4 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

10.40

Security Agreements dated August 25, 2016 by Lucas Energy, Inc. in favor of International Bank of Commerce (Filed as Exhibit 10.5 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

44

10.41

Form of Limited Guaranty Agreement in favor of International Bank of Commerce dated August 25, 2016 (Filed as Exhibit 10.6 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

10.42+

Consulting Agreement between Richard N. Azar II and Lucas Energy, Inc. dated August 29, 2016 (Filed as Exhibit 10.7 to the Company’s Current Report on Form 8-K, filed with the Commission on August 31, 2016, and incorporated herein by reference)(File No. 001-32508)

10.43

Letter Agreement dated September 29, 2016, by and between Lucas Energy, Inc. and RAD2 Minerals, Ltd. (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on October 3, 2016, and incorporated herein by reference)(File No. 001-32508)

10.44

Second Amendment to Stock Purchase Agreement dated September 29, 2016 (Filed as Exhibit 10.2 to the Company’s Current Report on Form 8-K, filed with the Commission on October 3, 2016, and incorporated herein by reference)(File No. 001-32508)

10.45

Amendment Dated October 31, 2016, to the Second Amended Letter Loan Agreement and the Second Amended Promissory Note, both dated November 13, 2014, by and between Lucas Energy, Inc. and Louise H. Rogers (Filed as Exhibit 10.1 to the Company’s Current Report on Form 8-K, filed with the Commission on November 1 2016, and incorporated herein by reference)(File No. 001-32508)

*** Attached as Exhibit 101 to this report
are the following documents formatted in XBRL (Extensible Business Reporting Language): (i) the Balance Sheets – September
30, 2016 and March 31, 2016, (ii) the Statements of Operations - Three and Six Months Ended September 30, 2016 and 2015, (iii)
the Statements of Cash Flows - Six Months Ended September 30, 2016 and 2015; and (iv) Notes to Financial Statements.